Borrowing in SCI: how to finance your real estate project?

To borrow in SCI you need good financial planning and a solid file. You will thus put all the chances on your side to obtain advantageous financing. The Civil Real Estate Company or SCI has become essential if you wish to invest in real estate in a structured and shared manner.

In 2023, nearly 1 million SCIs were listed in France, according to INSEE statistics. This is a structure perfectly suited to real estate acquisition and management projects. In particular, in a family context or between non-family partners. The family SCI makes it possible to protect and transfer assets between relatives. The classic SCI, for its part, favors projects intended for rental or capital gains with external partners, often motivated by profitability.

Obtaining financing is a major asset for an SCI. Bank loans, for example, will facilitate access to higher value real estate for partners. It can also limit the personal investment effort. Individual risk will be reduced while increasing return opportunities.

According to a study by the Banque de France, nearly 80% of SCI projects use bank financing . This is a lever that plays a decisive role in real estate investment strategies.

What is an SCI and its borrowing specificities?

Several people will be able to acquire, manage and transfer real estate together, while benefiting from specific financial and tax advantages thanks to a legal structure called a Civil Real Estate Company or SCI. It is different from joint ownership , which imposes shared management in a more rigid manner.

The SCI allows partners to define the rules of governance via statutes. This facilitates collective decision-making and continuity in the event of succession. Its creation involves administrative procedures such as drafting the statutes and registration in the trade and companies register (RCS). However, this structure simplifies management and optimizes the long-term holding of assets.

In this type of company, the bank loan can be taken out in the name of the company. This allows contributions to be pooled and responsibilities to be distributed between the partners. Individual risks can be reduced and real estate projects will be more profitable.

The commitment of each partner will be based on their participation in the company. Banks will consider the company's overall debt capacity. It will then be possible to access larger loans than an individual could obtain alone.

The SCI can be subject to the transparency tax regime (IR) , which means that the profits generated by the company are not taxed at the level of the structure itself, but at the level of the partners. Each will thus declare their real estate income according to their share in the company. They will potentially be able to benefit from advantageous tax regimes (deductions of loan interest, maintenance costs, etc.). 

The number of SCI in France has experienced strong growth in recent years, with around 1 million structures recorded in 2023, according to INSEE. An annual increase of more than 5% since 2018 has been noted. This success is explained by the tax and financial advantages it provides, especially in the context of wealth transfer.

According to the Ministry of Economy, the SCI would allow on average a tax saving of 15% on inheritance tax for intra-family transfers . It is thus popular with families seeking to preserve their real estate assets.

Personal loan or loan via SCI: which solution should you choose?

Choosing between a personal loan from partners to finance an SCI and a loan taken out directly by the company is a decision that will depend on:

• financial goals

• the ability of each partner to assume the obligations related to the loan.

Option	Description	Benefits	Disadvantages
Personal loan	Each partner will take out a loan individually to finance their contribution to the SCI. He will borrow according to his financial capacity and will hold a share of the profits proportional to his contribution.	- Individual freedom: each partner can adjust the amount borrowed. - Non-solidarity of partners: if one partner cannot repay, the others are not impacted. - Distribution of shares according to contribution.	- Multiple credit management: each partner must manage their own loan. - Variable rates: each partner can have a different rate depending on their profile and financial history.
Loan in the name of the SCI	- The SCI will take out the loan for the property purchase - The partners will contribute part of the capital as equity, - The collective debt capacity is considered - Debt management is mutualized.	- Credit pooling: a single loan taken out by the SCI. - Simplification of management: the SCI manages the credit. - Better negotiation: possibility of obtaining a more advantageous rate for a high collective amount.	- Partial joint and several liability: the partners may be liable in the event of failure of the SCI. - Dependence on the financial solidity of the SCI, which is based on the commitment of the partners according to their shares.

The steps to obtain a loan in SCI

Here is the detailed process to obtain your loan, step by step, with the necessary documents and the expectations of the banks for this type of financing.

Stage	Description	Documents and Requirements
1. Prepare a solid case	Put together a complete file to convince the bank of the financial viability of the SCI. A well-prepared file strengthens the credibility of the SCI and demonstrates the ability of the partners to repay the loan.	- SCI statutes: Define the structure and operation of the company. - Contribution from partners: Personal contribution often between 10% and 30% of the investment amount. - Profitability forecast: Projection of revenue and expenses.
2. Bank guarantees and requirements	Banks require solid guarantees, because the SCI is a property management company. These guarantees aim to limit the risk for the bank.	- Personal contributions: Minimum contribution of 20% of the property. - Personal guarantees: Commitment of partners to reimburse in the event of default. - Mortgage: Main guarantee on the real estate.
3. Unanimous agreement of the partners	The SCI requires unanimity of the partners to contract a loan. This protects the partners from excessive debt imposed by a minority and ensures that each member is fully on board with the investment.	- Why unanimity?: Ensures that all partners share the same risks and are aligned on the investment strategy.
4. Comparison of banking offers	Comparing bank offers allows you to choose the best rate and the loan conditions most suited to the SCI project.	- Use a broker: Negotiate the best rates. - Compare several banks: Optimize conditions by approaching several establishments. - Choice between fixed and variable rate: Depending on objectives and risk tolerance.

 

Pooling of borrowing capacity 

The partners will be able to combine their borrowing capacities to finance large-scale real estate projects and optimize the profitability of the investment by creating an SCI. This will generate a leverage effect that will allow the company to finance a significant part of the real estate purchase by borrowing. The return on invested equity will be optimal.

Borrowing capacity of partners and impact of guarantees

In a SCI, the liability of the partners is unlimited with respect to the debts contracted by the company. What does this mean? If the company is unable to repay its debts, creditors can turn to the personal assets of the partners according to their participation. Each will then be able to contribute to increasing the guarantees presented to the bank. The company will then be more solvent for obtaining credit.

Each partner will thus be able to enhance their own assets to increase the overall borrowing capacity of the SCI . This will increase the company's chances of obtaining credit on advantageous terms. Investors will be able to benefit from a borrowing capacity greater than that which they could obtain individually, while spreading the risks between them.

Profitability and impact of leverage in SCI

The average gross yield on real estate in France varies from 4% to 7%, depending on the location of the property and the type of real estate (residential or commercial) (INSEE). By adding the leverage effect through bank financing, the return on equity can exceed 10%, especially in tight areas where rental demand is strong and rents are high.

Interest rates on real estate loans for SCIs in 2024 are on average around 3% for terms of 15 to 20 years . With optimal leverage, rental investment in this type of company can thus offer a net rate of return of 7% to 9% in dynamic areas. It is much higher than traditional investments without recourse to borrowing.

The essential prerequisites for borrowing with an SCI

Borrowing for an SCI involves specific criteria and guarantees that banks require before financing large-scale real estate projects. 

Sufficient initial capital

A substantial contribution not only limits the amount to be borrowed, but also proves to banks the partners' ability to contribute financially. In general, banks recommend that the SCI finances at least 20% of the project with its own funds to avoid full financing. This reduces the risks for lenders. They are more likely to grant a loan when the partners contribute a significant amount.

Unanimous agreement

In a civil property company, any loan taken out engages the liability of the partners, which requires their unanimous agreement. Their liability is unlimited in the event of the company's failure. Creditors may turn to the members' personal assets to repay debts. Each will then be committed with explicit consent.

The unanimous agreement ensures complete transparency and allows the alignment of the objectives of each partner before making a major financial decision.

Borrower insurance

Within the framework of an SCI, the partners can choose between:

• group insurance taken out in the name of the company

• individual insurance for each partner.

Group insurance ensures that the company can repay the loan in the event of unforeseen events, such as the death or disability of a partner. It will simplify the management of the contract. However, it can be expensive, especially if the partners have varied profiles in terms of age or health.

Conversely, individual insurance allows each partner to choose coverage adapted to their profile and their budget, and thus be able to make savings.

A younger, healthier partner might get insurance at a lower cost than others.

The advantages and risks of borrowing for an SCI

Partners must weigh the pros and cons of borrowing for an SCI. They will then be able to make informed decisions and manage the SCI's finances optimally.

 

Benefits	Risks
Flexibility of collective financing   The SCI allows partners to pool their resources, thus gaining access to larger real estate assets.   Each partner can contribute a different share according to their abilities. This facilitates the management of participations and reimbursements.	Unlimited liability of partners   The partners are liable for the debts of the SCI from their personal assets, in proportion to their share.   In the event of default, each partner may be required to repay the debt, thus risking their personal assets.
Access to larger loans     By pooling the borrowing capacity of the partners, the SCI can obtain higher loans from banks, which consider the total assets and guarantees of each partner.   Banks may offer higher amounts and favorable terms depending on initial contributions.	Need for concerted management   Management requires decisions to be taken jointly, often unanimously.   Disagreements between partners can slow down decisions and jeopardize the stability of the SCI.
Optimizing profitability   Borrowing allows the application of financial leverage, increasing the profitability of investments by reducing the personal contribution.   If the rents cover the monthly loan payments, the SCI can generate favorable net profitability, particularly in areas with high rental demand.	Consequences of non-payment   In the event of non-repayment, the bank can seize the assets of the SCI. If these assets do not cover the debt, the creditors can turn to the personal assets of the partners.   This can have significant financial repercussions, especially if the loan is substantial and without solid guarantees.

 

Obtain credit for your SCI online

More and more investors are choosing online credit to finance their real estate projects via an SCI. It offers quick access to offers and simplified management of procedures. Online platforms and banks offer various services tailored to the needs of businesses. This includes credit simulators and flexible financing options.

Advantages of online credit for an SCI

Save time and simplify procedures

With online credit, the partners of an SCI can begin their financing process directly from home, without having to travel. The required documents, such as the SCI statutes and the financial forecast , can be downloaded and processed online. This will considerably reduce the time and complexity of the process.

Monitoring the file will also be easier: investors can check the progress of their credit application in just a few clicks. This is a significant advantage compared to the often longer procedures in agencies.

Transparency of offers and access to credit simulators

Online banks and digital brokers provide simulators. SCIs will be able to quickly view the credit conditions. You will thus obtain an estimate:

• of the amount borrowable,

• of the applicable rate,

• monthly payments to be repaid.

This transparency helps SCI partners to better compare offers and assess the profitability of their project before committing. Some platforms, such as those offered by online brokers or credit comparators such as Cafpi, also display the specific conditions of the SCI loan.

Often advantageous conditions

Online banks, having reduced structural costs compared to traditional establishments, often offer attractive interest rates. This reduction in operational costs allows them to offer competitive rates and advantageous conditions for SCI loans.

An online loan might have an average interest rate of 2.5% . A similar loan at a traditional bank might be around 3% or more, depending on the terms of the institution.

Comparing Options: Online Banking vs. Traditional Banking

Criteria	Online banking	Traditional Banking
Flexibility	Online banks are more flexible, with simplified procedures and rapid decision-making.   Customers can manage their operations without an appointment and monitoring is digitalized.   It is ideal for investors who are comfortable with digital interfaces.	Traditional banks offer the possibility of meeting an advisor in person, which can reassure clients for large-scale projects.   However, they often require more formal procedures and longer time limits for certain procedures.
Personalized approach	Online banks generally offer standardized support with less personalization.   This may be suitable for self-employed investors and simple projects.	Traditional banks favor a close relationship with dedicated advisors.   This customization is an asset for complex projects requiring in-depth advice, although it can be more expensive and time-consuming.
Comparative study of rates	Generally lower interest rates, on average between 2.5% and 2.8% for SCI loans, thanks to reduced operating costs and a strategy of attracting new customers (source: Cafpi).	Slightly higher interest rates, between 3% and 3.5% for similar SCI loans, due to the higher operating costs of physical branches and personalized service (source: Cafpi).

What you need to remember

To borrow through a civil property company, you must first understand the different options available, such as online credit and financing through a traditional bank. You must also follow specific steps to build a solid file. Each choice has advantages and disadvantages, whether it is the speed of online procedures or personalized support in the agency.

It is advisable to use a broker to optimize the financing conditions and to take into account the specific objectives of each partner, as well as the borrowing capacity of the SCI.

Rigorous financial planning remains essential to guarantee the profitability of the real estate project and avoid risks linked to the financial commitments of the SCI.