Bank security for farm loans in France: guarantees, mortgages, pledges and warrants
What is security (a guarantee)?
When you apply to your bank for financing, it will usually ask for security (the legal term is « sûreté ») — but you should know that security is not compulsory.
Whether it is required depends on many factors, such as the viability of the project, your personal and business assets, how long you have banked with the institution, how your account is run and the savings you hold there. Requests for security are therefore subjective and decided case by case.
Security is thus a form of protection that covers part of a lender's final loss if the borrower defaults, in return for a fee paid either by the bank or by the borrower.
But be careful: having solid security to offer does not mean your banker will grant you a loan! Lending decisions don't work that way round. The bank must first assess your business's ability to meet the loan repayments, and only then check the reliability of your security.
Some of the security required for business loans is similar to that for property loans, such as a mortgage, the special statutory mortgage for the lender of the purchase price (formerly the privilège de prêteur de deniers) or a joint and several guarantee.
The only difference is that the mortgage will be taken over your business premises (buildings, warehouse, shed or land) rather than your private home. And the guarantee bodies are different: instead of Crédit Logement, your loan will be guaranteed by Bpifrance, SIAGI, Interfimo or France Active, for example.
The advantage for the bank of using a guarantee body is that a significant part of the risk is transferred to that body, which makes its decision easier.
One advantage for you is that a guarantee from a specialist body generally limits requests for personal guarantees and protects your main home and your savings.
What security for medium- and long-term loans?
Personal guarantees (caution)
For long- and medium-term financing, banks also frequently ask for a joint and several guarantee when the farm is run as a company (as a sole trader there is no separate legal entity to stand surety for — in a way, you already guarantee yourself).
Because business and personal assets are separate, your banker may ask you, and your partners, to stand surety personally for the loan. If things go wrong, pursuing a company that already has heavy debts (wages, tax, suppliers…) and/or is worth almost nothing won't get the bank very far.
You, on the other hand, as an individual, may own savings and property that can be used to cover your business debts.
There are different types of personal guarantee. In a simple guarantee, the guarantor's commitment is secondary; in a joint and several guarantee, it is a primary commitment.
Beyond the distinction between simple and joint and several guarantees, the reform of French security law (Ordinance No. 2021-1192 of 15 September 2021, in force since 1 January 2022) brought the rules on personal guarantees together in the Civil Code (Articles 2288 et seq.). Any individual standing as guarantor must personally add a statement by which they undertake to pay the creditor what the debtor owes if the debtor defaults, up to an amount covering principal and accessories, written out in words and figures (Article 2297 of the Civil Code). This statement can now be added electronically.
In a joint and several guarantee, the guarantor gives up the right to require the creditor to pursue the company first. In all cases, an individual guarantor's commitment is capped at the overall amount stated in their declaration, covering principal and accessories. In practice, the amount guaranteed is often higher than the amount borrowed (around 30%) and the term longer than the loan: you can negotiate to limit the guarantee to a set amount and a set term.
The guarantee must also be proportionate to the guarantor's income and assets. If, when it was given, it was manifestly disproportionate, it is reduced to the amount the guarantor could commit to at that date (Article 2300 of the Civil Code): it is no longer cancelled in full, as it was under the old rules.
Finally, a professional creditor must, at its own expense, inform every individual guarantor, before 31 March each year, of the principal, interest and accessories still owed at 31 December of the previous year (Article 2302 of the Civil Code).
Mortgages (hypothèque)
A mortgage, like a pledge over a business, is a form of real security. The creditor takes it over a property against the risk of non-payment. It is set out in a notarial deed specifying what it covers (a building, or an available property right such as usufruct, full ownership or bare ownership), the amount, and the terms of the mortgage or property loan (instalments, fixed or variable rate…).
Every mortgage is registered by the notary with the land registration service (service de la publicité foncière) and incurs land registration tax (0.70%, Article 844 of the French General Tax Code), on top of the deed costs. It lasts for the same term as the loan.
If the borrower defaults, the mortgage is "enforced": the creditor can apply for the property to be seized, followed by an auction ordered by the competent court.
Several types of mortgage have been created to meet specific financing needs. In farming, the main one is:
The conventional mortgage
A conventional mortgage is agreed between two parties by notarial deed. It guarantees the creditor payment of the debt if the debtor fails to pay. The debtor keeps the use of the property for as long as the security runs, provided they meet their repayment obligations. This is the form best suited to financing business property.
The rights conferred by a mortgage
For the creditor
Right of preference: if payments are missed, the creditor can enforce the mortgage by forcing a sale of the property at auction and claiming payment ahead of the debtor's other creditors.
Right to follow (droit de suite): the borrower remains bound by their repayment obligations. If the mortgaged property is sold, the mortgage follows it: the creditor can enforce it, through a bailiff, even after a change of owner.
Ranking: when several creditors hold a mortgage on the same property, their rank determines the order in which they are paid when it is sold. This order can be changed by simple agreement, except in a business liquidation, where some creditors hold preferential rights (tax authorities, Urssaf social security…).
For the debtor
Release (mainlevée): the mortgage registration lapses one year after the last loan instalment. For a loan with no fixed instalments, such as an overdraft facility, a mortgage is valid for a maximum of 50 years.
If the property is sold before the end of the loan, the seller must apply to the land registration service for a release to remove the registration, and pay the release costs.
The special statutory mortgage for the lender of the purchase price (formerly the privilège de prêteur de deniers)
Since 1 January 2022, the privilège de prêteur de deniers has become a special statutory mortgage (Article 2402 of the Civil Code). Along with the conventional mortgage and the personal guarantee, it is one of the forms of security a lender may ask for on a property loan.
It allows the lender to be paid first from the sale price if the property is seized and sold. An important change: it ranks from the date it is registered with the land registration service, and no longer retroactively from the date of the sale.
To benefit from it, all 3 of the following conditions must be met:
The sale and loan deeds must be drawn up by a notary;
The loan deed must state that the money borrowed is to buy the property;
The sale deed must state that the price was paid with the loan.
It can only secure the part of the loan that finances the purchase price of an existing property or of land: not construction, works or an off-plan purchase.
It is generally cheaper than a conventional mortgage.
Pledges (nantissement)
A pledge (nantissement) is the assignment, as security for an obligation, of an intangible movable asset or a set of intangible movable assets, present or future.
Given the mutual interest of the parties to such an agreement, this form of security for business loans has developed enormously over the past decade and now comes in many forms: pledges of receivables, of a life insurance policy, of financial instruments, of cash investments, of company shares, or of a business (fonds de commerce).
Pledges of company shares or of your business are also common, particularly when taking over a business or setting one up. This form of security only covers intangible movable assets, unlike a gage (tangible assets). Share pledges are increasingly common in farm takeovers where the seller has transferred the land into a company. As the incoming farmer only buys shares in the company, the bank cannot take a mortgage over the company's land. It therefore asks for a pledge over the shares, usually for an amount matching the value of the land contributed.
Assignment of receivables (délégation de créance)
Under French civil law, a délégation de créance is an arrangement in which a creditor (the farmer) asks their own debtor (the insurer) to commit to a third party (the banker). Three parties are involved: the holder of the savings product (the farmer), the bank granting the loan, and the institution managing the investment put up as security (the insurance company). Legally, it only requires an amendment to the investment contract given as security (life insurance policy, capitalisation bond, securities portfolio or PEA share savings plan). Using a life insurance policy in this way has advantages: no withdrawals are needed, so the savings keep growing regardless of the loan; the security is cheaper than a mortgage; and, depending on the bank, putting up a policy as security can reduce the need for death cover on the loan.
In practice, banks often use a délégation de créance, which only requires an amendment to the investment contract given as security.
Pledging a life insurance policy for an amount matching the loan is security that banks generally value highly, because it is very solid. It does mean the pledged savings are locked in for the term of the loan. You can, however, ask for the pledge to be released if the amount still to be repaid is small compared with the original amount, or if the loan is close to maturity.
Pledges of company shares
Company shares (parts sociales) are the fraction of a company's share capital which, when held, gives the partner the right to take part in the life of the business and share in its profits.
A pledge of company shares must be recorded either by notarial deed or by private agreement served on the company or accepted by it in a notarial deed, and must be publicly registered; the date of registration determines the ranking of the pledgees.
Once the share pledge agreement has been signed, it is publicly registered, at the creditor's request, with the registry of the commercial court where the company whose shares are pledged is registered.
While a share pledge has the advantage of being simple and effective — the pledgee has both a right to follow and a right of preference — it has one major weakness: the value of the assets it covers can fluctuate (the shares of a farm that goes bust may be worth next to nothing, depending on what the shares are made up of).
For short-term, equipment or livestock financing, you may come across:
Some forms of security are much more common for farmers and businesses. For example, for a tractor or vehicle on lease or loan, your banker may approach the dealer and take a pledge (gage) over it (if it is registered), or ask for an agricultural warrant if the equipment is not registered. Personal guarantees are frequently requested for short-term credit such as credit lines or advances.
Pledges over tangible assets (gage)
A gage and a nantissement both allow a debtor to secure a debt to a creditor (a company or an individual) by agreement, by assigning as security an asset, a business or a security they own. If the debtor fails to pay on the due date, the creditor can have the asset sold and be paid from the proceeds, or take ownership of it. The two differ in the nature of the asset given as security. A gage can be granted by any of the creditor's debtors or by a third party.
Agricultural warrant
It is a form of real security that a borrowing farmer grants over the assets of their farm without physically handing them over to the lender (the bank). A warrant makes it possible to pledge goods under a credit agreement. It is generally used for livestock, crops or equipment. Case law is not uniform on how the pledged assets are identified. If creditors are not paid, they have no right to follow the assets, unless the buyer is proven to have acted in bad faith. A warrant is only enforceable against third parties once it has been entered in the register of security interests over movable assets (registre des sûretés mobilières), kept by the registries of the commercial courts and the judicial courts (Articles L342-1 et seq. of the French Rural and Maritime Fishing Code; decree of 29 December 2021).
Dailly assignment of receivables (cession Dailly)
The Dailly assignment is governed by Articles L. 313-23 et seq. of the French Monetary and Financial Code. It is a special form of assignment of receivables, provided for by Articles 1689 et seq. of the Civil Code. Often used for CAP (PAC) payments or short-term credit advances, it is named after the senator who wrote the law. It allows a creditor (the farmer) to assign their business receivables, together with the guarantees and security attached to them, in a simple way to an assignee (the banker), which must be a credit institution. This technique makes it easier for farms to obtain credit. Your bank will generally set up a Dailly assignment on a "certain" or regular receivable, such as milk, egg, poultry or pig payments…
Article updated in October 2026 to reflect the reform of French security law (Ordinance No. 2021-1192 of 15 September 2021).
Sources (in French):
https://www.service-public.fr/professionnels-entreprises/vosdroits/F22988
https://www.credit-agricole.fr/professionnel/blog/finances/pret-professionnel-la-garantie-est-elle-obligatoire.html
https://www.afecreation.fr/pid919/dispositifs-et-organismes-de-garantie.html
https://billetdebanque.panorabanques.com/credit/quelles-garanties-pour-votre-pret-professionnel/
https://www.creditprofessionnel.com/garantie-pret-professionnel/
http://www.aveniragricole.net/011-8203-Les-garanties-bancaires.html
https://www.service-public.fr/particuliers/vosdroits/F786
https://www.credit-et-banque.com/nantissement-delegation-de-creance-definition-et-principes/
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