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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 Lendico bring together borrowers and investors on their platforms. 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 Lendico. Since the end of 2016, the PostFinance subsidiary has been granting loans of up to CHF 10,000 to CHF 500,000 with a maximum term of five years. 

  • The SME makes a free loan application to Lendico and then submits the necessary documents directly via a simple online application, or by e-mail or post.
  • 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. This step also includes a telephone conversation between the company looking to borrow and a Lendico credit analyst.
  • 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.
  • Lendico 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.

“The money is on your account in no time at all”

More and more Swiss SMEs are therefore using the huge potential of online credit markets – just as the measuring instrument supplier, Witronic, has done. The trading company, based in Rothrist and Bulle, operates in the industrial metrology sector and was faced with the challenge of having to finance various projects in a short space of time.  “We needed it for an IT system, moving from Zofingen to Rothrist and streamlining the product range, including the purchase of demonstration equipment”, explains CEO Markus Kistler. To cover the CHF 300,000 financing requirement, the Swiss SME submitted a loan application to Lendico. His evaluation of the collaboration: “It was all very uncomplicated, direct and quick. In my view, Lendico also made us a fair offer.” For this reason, he also recommends the online marketplace for corporate loans to other SMEs looking for a quick financing solution. “The effort involved compared to going to a bank is very low in my opinion”, he emphasizes. “Everything is processed directly and is less bureaucratic, and the money is in your account in no time at all.”

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