Switzerland makes the lives of fintechs easier. The Swiss Federal Council has implemented a new set of rules concerning the fintech industry which fulfils important desires of the sector. Particularly one change was very important for crowdlending platforms such as swisspeers: On August 1, 2017, an old rule within the banking law around the maximum of investors per counterparty was abrogated. This rule limited the number of investors per loan to a maximum of 20. An environment without the restriction of the number of investors enables crowdlending platforms to grant larger loans.
What does this mean in practice?
For companies: Larger Loans
Larger loans become feasible as a single loan can be financed by more than 20 investors. Thus, a wider investor base gains access to financing larger loans while the prospect of success for these kind of projects increases.
In this way, companies that carry out commercial-industrial operations do not risk violating the Banking Law by taking out loans up to 1 million Swiss Francs from more than 20 investors. According to a study published by SECO (the Swiss State Secretariat for Economic Affairs), currently 75 percent of all Swiss SMEs take out loans worth less than one million Swiss Francs. Due to the change in regulation, companies will be provided with broader financing opportunities.
For investors: Better diversification thanks to smaller investment tranches
Investors are given the opportunity to finance loans with smaller investment tranches. Up to now, the necessary minimum investment was derived from the desired loan amount divided by 20. Thus, an amount of 10’000 Swiss Francs was not uncommon for an investment tranche. That does not need to be the case anymore. Even larger loans can be accessed with smaller tranches. Hence, investors can better and easier diversify their portfolios. This further promotes the distribution of the investment risk and makes crowdlending also interesting for investors with a smaller target portfolio size.
For the national economy: Greater stability
From the perspective of the national economy, crowdlending is less risky than the banking business. There is no leverage as within banks’ balance sheets and no term mismatch between assets and liabilities. In contrast to the banking business, loans do not constitute non-interest-bearing savings of investors. Through crowdlending money flows directly from investors to enterprises. Investors in turn receive fair interest payments for bearing the credit risk. Therefore, money is productively deployed in the national economy and the overall system is not strained with newly created risks.
Conclusion: ’Thank you’ to our Federal President Mrs. Leuthard. We will stay on the ball!
We at swisspeers and our SME customers are very satisfied with the adjusted regulation.
These adjustments form great prerequisites for pushing our business further. The access to loans is becoming easier for Swiss SMEs. Together with our investors we contribute to a strong SME economy in Switzerland.
Written by Alwin Meyer (CEO and co-founder of swisspeers).