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Created on 04.04.2019

Corporate loans without a bank

Crowdlending lets SMEs access a corporate loan without needing a bank. So how does it work? Online credit marketplaces such as LEND bring together borrowers and investors on their platforms, whether private individuals or companies. Thanks to simple procedures, the credit is quickly made available.

Acquiring a new machine? Expanding abroad? Moving to a new location? The funding requirements for Swiss SMEs to implement business projects are still high. According to a The link will open in a new window SECO study, around one third of Swiss SMEs are dependent on debt capital. Its even more surprising, that over eight percent of companies shy away from applying for corporate loans, despite having financing requirements. The reasons for this, according to the study, stems from a fear of having to deposit too much collateral and undergoing tedious credit processes. Or companies are concerned that the loan application will be rejected anyway or cost too much.

Crowdlending as an alternative to a bank loan

What’s needed then are forms of financing, which help SMEs obtain corporate loans simply and efficiently.  Such as crowdlending, which is similar in principle to a traditional bank loan. However with crowdfunding, the capital requested is not provided by a bank, rather it is collected by institutional and private investors via an online credit marketplace.

How awarding a corporate loan works via private and institutional investors

But how does lending on a credit marketplace work for Swiss SMEs in practice? We demonstrate this by means of an application process at LEND. Since the end of 2016, the PostFinance cooperation partner has been granting corporate loans of up to 20,000 francs to 1,000,000 francs and personal loans of up to 5,000 francs to 200,000 francs – both with a maximum term of five years.

  • The SME makes a free loan application to LEND and then submits the necessary documents directly via a simple online application.
  • If the documents are satisfactory and corresponds to the credit worthiness and expectations of the borrower, a non-binding offer is made. This all occurs within 48 hours.
  • The requested capital is collected from institutional and private investors via the online marketplace and when ready, it is transferred to the borrower.
  • For the repayment, the borrower pays monthly instalments including the agreed interest to the lender’s bank, where the money is then reimbursed to the investors via the platform.
  • LEND receives a fee for its services if the brokerage is successful.

Benefiting from crowdlending

The advantages of crowdlending corporate loans for SMEs are obvious. Since the application process to online credit marketplaces primarily takes place online, from initial contact to the loan payment, the credit decision can be made quickly and cost-efficiently. This in turn has a positive effect on the interest rates. Furthermore, the procedures are simple and the processes transparent. And last but not least, the online marketplaces are also more open and flexible in terms of the projects they support. Whereas banks often react sceptically to newer and more innovative business models, credit marketplaces are usually much less restrictive in this regard.

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