Inter-company lending: a little-known solution

Article updated in September 2026

Can a company with surplus cash grant a loan to a supplier, subcontractor, franchisee or other business partner? Long reserved, in practice, for banks and companies belonging to the same group, this possibility is now permitted under certain conditions.

Inter-company loans allow a commercial company to temporarily finance a micro-enterprise, SME, or mid-sized company with which it has economic ties. This financing can address a temporary cash flow need, secure a supply chain, or support the development of a strategic partner.

The system remains strictly regulated. Before setting up a loan between companies, it is necessary to verify the eligibility of the lender and the borrower, the existence of an authorized economic link, compliance with financial ceilings and the applicable formalities.

What is an inter-company loan?

In principle, ArticleL. 511-5 of the Monetary and Financial Code prohibits any person other than a credit institution or a financing company from carrying out credit operations on a regular basis.

By way of exception, ArticleL. 511-6, 3 bis, of the Monetary and Financial Code authorises certain commercial companies to grant, as an ancillary activity, loans of a duration of less than three years to companies with which they maintain specific economic links.

Inter-company lending therefore constitutes an exception to the banking monopoly. It does not allow a company to develop a regular lending activity, but only to provide occasional financing to an economic partner under the conditions set by law.

It must also be distinguished from:

• payment terms granted to a customer;
• of an advance paid under a commercial contract;
• of a contribution to a partner's current account;
• treasury operations carried out between companies belonging to the same group;
• crowdfunding.

Each of these mechanisms obeys different rules.

In what situations should inter-company loans be used?

Inter-company lending can be considered, in particular, when a partner has a temporary financing need that could jeopardize the continuation of a business relationship that is beneficial to the lender.

It can, for example:

• to a client to support a strategic subcontractor;
• to a franchisor to temporarily support a franchisee;
• to a company to secure a supplier essential to its business;
• to an industrial partner to finance a stage of a joint project;
• to a client company to support a service provider whose business continuity conditions its own.

For the lender, the transaction can help preserve a supply chain, a distribution network, or essential expertise. For the borrower, it offers a supplementary source of financing, based on an already established economic relationship.

However, this mechanism should not be used to artificially keep a company afloat if its difficulties are structural. The borrower's repayment capacity must be carefully assessed before any disbursement.

Which companies can borrow?

Inter-company loans can be granted to:

• a micro-enterprise;
• a small or medium-sized enterprise — SME;
• a medium-sized company — ETI.

Large companies therefore cannot benefit from this scheme as borrowers.

Membership in one of these categories is determined in particular by the company's workforce, turnover, and total assets. This verification must be carried out before the contract is concluded, taking into account, where applicable, the data of the group to which the borrower belongs.

What conditions must the lending company meet?

Not all companies can grant inter-company loans. The lending company must meet several cumulative conditions.

To be a commercial company

The lender must be constituted in the form of a commercial company, for example a SAS, a SARL, a SA or a SNC.

An association, a civil society or a natural person cannot avail themselves of this regime, subject to other exceptions to the banking monopoly which may possibly apply to them.

Having verified accounts

The accounts for the last completed financial year must have been audited by a statutory auditor. The scheme is also open to companies that have voluntarily appointed a statutory auditor under the conditions set out in the Commercial Code.

Maintain a strictly ancillary lending activity

Granting loans should not become a regular business activity. It should remain secondary to the company's main business.

The multiplication of operations, the regular search for borrowers or the organization of a genuine financing activity could call into question the application of the exception and expose the lender to a risk of violating the banking monopoly.

To present a sufficiently solid financial situation

At the close of each of the two financial years preceding the granting of the loan:

• the equity of the lending company must be greater than its share capital;
• its gross operating surplus must be positive;
• Its net cash flow must be positive.

These conditions aim to prevent a company from weakening its own financial situation by tying up cash that it would need for its business.

What economic links should exist between companies?

The loan cannot be granted to just any company. The lender and the borrower must have one of the economic links listed in ArticleR. 511-2-1-1 of the Monetary and Financial Code.

This condition can be met, in particular, when:

• the companies belong to the same economic interest group or to the same group awarded a public procurement contract;
• they participate in the same project which benefits, under certain conditions, from a public subsidy;
• the borrower, or a member of its group, acts as a direct or indirect subcontractor of the lender or a member of its group;
• the lender has granted the borrower a patent license, a trademark license, a franchise or a management lease;
• the lender is an important client of the borrower;
• both companies maintain significant business relationships with the same third-party company.

When the link is based on a customer relationship, the purchases made must in principle reach at least 500,000 euros or represent at least 5% of the supplier's turnover during the reference period.

The mere existence of occasional business relationships is therefore insufficient. The economic link invoked must be precisely identified and documented before the loan is concluded.

How much can be loaned?

The amount of an inter-company loan is subject to a double ceiling.

An overall cap on all loans granted

During the same accounting period, the total principal amount of loans granted by a company cannot exceed the lesser of the following two amounts:

• 50% of its net cash, or 10% of this cash when calculated on a consolidated basis at group level;
• 10 million euros for a lending SME, 50 million euros for an ETI and 100 million euros for a large company.

A limit applicable to each borrower

The total amount loaned by the same company to the same borrower during a financial year cannot exceed the higher of the following two amounts:

• 5% of the overall ceiling applicable to the lender;
• 25% of this overall ceiling, up to a limit of 10,000 euros.

These rules require that ceilings be calculated before signing and that a record be kept of all loans already granted during the financial year.

What is the maximum duration of an inter-company loan?

The contract must stipulate a duration of less than three years.

This maximum term does not mean that the loan must necessarily be repaid in a single lump sum at maturity. The parties may agree to staggered repayments, a deferral of repayment, or a payment schedule tailored to the borrower's projected cash flow.

The chosen schedule must nevertheless remain compatible with its actual repayment capacity.

Should the loan be subject to interest?

The parties must determine whether the loan is interest-free or carries interest. In practice, a fee is often charged to compensate for the immobilization of funds and the risk borne by the lender.

The interest rate, the method of calculating interest, and the payment dates must be clearly stated in the contract. The tax and accounting implications of the remuneration must also be examined.

An abnormally low or high rate can raise difficulties, particularly with regard to the company's interests, the relationships between the parties, and applicable tax rules. It is therefore recommended to be able to justify the financial terms chosen.

What formalities must be observed?

The conclusion of a written contract

Inter-company loans must be formalized by a contract.

This contract must specify, in particular:

• the amount made available;
• the duration of the loan;
• its possible destination;
• the interest rate and how it is calculated;
• the repayment schedule;
• the conditions for early repayment;
• the borrower's declarations and guarantees;
• any guarantees that may have been granted;
• cases of early repayment;
• the consequences of a payment default;
• the applicable law and the competent jurisdiction.

The contract may also organize the periodic transmission of financial information and provide for an obligation to alert in the event of a deterioration in the borrower's situation.

Compliance with governance rules

The transaction must be authorized by the competent bodies of each company. Depending on the legal structure and the relationships between the parties, the regulated agreements procedure may apply.

Beyond this procedure, management must verify that the loan is consistent with the company's corporate purpose and its own interests. The expected economic benefit must not be purely theoretical: it must be identifiable and justifiable.

Information from the auditor

The auditor must be informed annually of current loan agreements. In a statement attached to the management report, the auditor certifies the initial amount, the outstanding principal, and compliance with applicable legal requirements.

Tax and accounting obligations

The loan, interest and repayments must be properly recorded in the accounting records of both companies.

The possible obligation to declare the contract using tax form no. 2062 must also be checked with regard to the amount of the transaction and all loans concluded or received during the year.

What are the main risks of inter-company lending?

The risk of non-reimbursement

The lender does not necessarily have the risk analysis tools used by a bank. Therefore, they must examine the borrower's accounts, cash flow forecasts, debt levels, and business prospects.

When the situation warrants it, guarantees may be considered: surety bonds, pledges, liens, independent guarantees, or commitments from partners. Their effectiveness and proportionality must be assessed on a case-by-case basis.

The risk associated with the borrower's difficulties

If the borrower encounters significant difficulties, the loan may not be repaid on its due date. The subsequent initiation of safeguard, reorganization, or liquidation proceedings may require the lender to file a claim and limit its recovery options.

Granting financing to a company in difficulty therefore requires a prior analysis of its situation and the credibility of its repayment plan.

The risk of economic dependence

The loan must not place the borrower in a state of economic dependence contrary to competition law.

In particular, the lender must not use the financing to impose abnormally low prices, excessive exclusivity commitments or commercial conditions unrelated to the purpose of the loan on its partner.

The risk of harm to the social interest

The directors of the lending company must be able to demonstrate that the transaction is in the company's interest and does not jeopardize its own cash flow.

A loan without identifiable economic consideration, granted under manifestly unbalanced conditions or to a notoriously insolvent borrower could engage the liability of managers.

The risk of violating the banking monopoly

If the legal conditions are not met, the operation does not benefit from the exemption provided for by the Monetary and Financial Code.

Particular attention must be paid to the ancillary nature of the loan, the quality of the parties, the duration, the ceilings and the reality of the economic link.

How to secure a loan between businesses?

Before concluding the transaction, it is recommended to carry out the following checks:

1. precisely identify the funded need;
2. verify the borrower's category and eligibility;
3. control the financial conditions imposed on the lending company;
4. characterize and document the economic link between the parties;
5. calculate the overall and individual loan limits;
6. analyze the borrower's repayment capacity;
7. determine a realistic duration and timeline;
8. set a justifiable rate and financial conditions;
9. examine the guarantees that can be obtained;
10. comply with authorization procedures and regulated agreements;
11. establish a complete loan agreement;
12. to complete the accounting, tax and auditor-related formalities.

Is inter-company lending a good financing solution?

Inter-company loans can be an effective tool for meeting a temporary cash flow need and preserving a strategic business relationship. Their speed and the mutual understanding between the companies involved can facilitate their implementation.

However, it should not be considered a simple informal advance between partners. It is a genuine credit transaction, subject to specific legal conditions and involving a financial risk for the lender.

The drafting of the contract must be preceded by a legal, financial, tax, and accounting analysis of the transaction. This preparation allows for verification of the loan's legality, protection of the lending company, and anticipation of potential repayment difficulties.

ARST Avocats assists companies in structuring and drafting their financing operations, organizing their governance and securing their relationships with their business partners.