Crowdlending an investment in Swiss SME-economy

Person who wrote the post admin Mar 30, 2022
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Crowdlending a secure and local investment in the Swiss economy

Not least since the worldwide Covid 19 pandemic, many people have become aware of the importance of small and medium-sized enterprises (SMEs) in the overall economy. SMEs provide over 66% of Swiss jobs. If the SMEs are doing badly, the Swiss economy is doing badly.

Logitech, Stadler Rail or Lindt & Sprüngli, all companies that have grown from SMEs to global corporations. Success stories like these could only be written thanks to outside capital. Thanks to people who provided capital to these companies. Be it because of the prospect of a good return or out of pure belief in these companies. Because SMEs are the companies with the greatest growth potential. With your investment in Crowd4Cash, you might enable an SME to expand decisively. The first of an infinite number of dominoes. Admittedly, not every investment in an SME ends up in a global corporation. But every investment with Crowd4Cash promotes the Swiss economy.

Funds that you as an investor make available to borrowers are used directly to pay for goods and services. So they flow directly into the economy. With the Crowd4Cash installment payment system, financing is directly linked to the purchase. The customer repays the loan in installments. This is how customers can make their dreams come true and SMEs can increase their sales. Hardly any other investment boosts the Swiss SME economy as directly as direct lending. In this blog we want to give you a deeper insight into how loans affect an economy and why SMEs are so important for Switzerland.

The realisation of ideas needs capital and trust

Why are loans needed at all? Isn't it thoughtless to spend money that you don't have yourself? Legitimate Questions. The answer is simple. Without credit there is no growth, no innovation, no progress. The company that produced your device, with which you are reading this post, borrowed from a young age to realize and launch its first products. There is also a high probability that your clothes only exist because the company that makes the clothes had access to credit. Loans are innovation drivers. Because the implementation of ideas and visions requires capital. A lot of capital that companies and private individuals can obtain through loans. As the Latin origin of the word credit from the Latin credere (trust, believe) reveals, credit is closely linked to capitalism and its belief in success and constant improvement. Loans are granted because the creditors trust the debtors and have a basic optimism that the money will be repaid. Thus, the granting of credit can be interpreted as a sign of trust in our economic system and in the constant improvement and innovation of products. But loans are not just the starting signal for the implementation of ideas. They are just as important for ensuring liquidity or driving business growth. Especially for SMEs, loans are usually the only short-term financing option because, unlike large companies, SMEs are not active on the public capital market. SMEs can only increase their share capital very slowly, if at all. Instead, you must resort to borrowing when you need liquidity quickly.

Why are SME so important for the Swiss economy

 

SMEs are very important for the Swiss economy, making up over 99% of the companies in the country and creating two thirds of the jobs (see figure). If SMEs are doing badly, the Swiss economy is doing badly. In addition to jobs, there are also SMEs that provide numerous services and contribute to our prosperity. The vast majority of all buildings in Switzerland were built by SMEs. Our houses, our streets, our water pipes - all built by SMEs. However, SMEs often have low liquidity because they are dependent on preliminary products to carry out their work. For example, construction companies need wood and cement. A motorcycle dealer needs motorcycles. An IT company needs licenses and software. In turn, these precursors often come from SMEs specializing in B2B relationships (Business to Business). The entire SME economy is closely linked. If a company gets into payment difficulties, e.g. because a customer pays too late, this has an impact on many other companies. Payment delays spread from one company to another. Until, in extreme cases, the liquid funds are no longer sufficient to cover the production costs or to stock up on the necessary preliminary products. Production is at a standstill. The business and economic damage is given. Not only can no sales be generated if production is at a standstill, wage costs must also continue to be borne. A company's financial reserves melt away.

Loans help in bottlenecks and thus prevent economic damage

In such situations, loans can help. The problem in the above situation is not that the money is not there, but that it is not there at time X. By taking out a loan in a targeted manner, the liquidity of the corresponding company can be ensured again. The suppliers can be paid on time and the liquidity bottleneck has no further impact on the retail chain. The credit acts like a bridge, making a new path accessible over an obstacle. Production losses can be avoided and the economic damage remains low. Such bridging loans can often be repaid after a short time.

Impact of private loans on the economy

Not only loans that are granted directly to companies boost the local economy, private loans do the same. In most cases, private loans are taken out to consume or to pay for consumption. The economy benefits from any kind of consumption because consumption inevitably increases demand. Personal loans are therefore also called consumer loans in the law. At Crowd4Cash there is even a type of loan that is even more closely tied to SMEs. The so-called PoS loans. A PoS loan is basically an installment payment solution for SME customers. The customer takes out a loan in order to be able to buy certain products whose price he does not want to pay all at once. The loan amount is paid directly to the dealer. The loan is then repaid in installments by the customer. With a PoS loan, investors can be sure that their money will flow directly into the coffers of an SME. Many Crowd4Cash PoS can generate additional sales thanks to this type of credit. Be it because customers suddenly buy from you who cannot afford to pay all at once or because existing customers tend to buy more thanks to the installment payment. Customers can suddenly fulfill dreams that were previously unattainable. The economy is booming because money that would otherwise be lying dormant in accounts with negative interest rates can circulate in the economy.

Granting loans means supporting small SMEs in a targeted manner

If you want to specifically support SMEs with your investment, you have various options. In addition to direct lending, there are also products in the private equity class that specifically promote SMEs. With so-called angel investments, wealthy investors or funds buy minority stakes in growing companies. The purchase amount is made available to the company so that it can continue to grow. However, this form of raising capital is only available to very few, mostly larger SMEs and it takes a very long time for the money to get into the company, if at all. In addition, this form of SME funding is only possible for a limited part of the investor base, since very large sums of money are used here. PoS loans at Crowd4Cash, on the other hand, flow directly to the travel agency or e-scooter shop next door. Not only does the money flow directly to the companies, PoS loans are usually smaller amounts than normal personal loans. Accordingly, higher interest rates are less important for the borrower. Investors, on the other hand, feel the higher returns when they invest in multiple PoS loans. Here you can view Crowd4Cash's current loan projects. Certainly some PoS projects will soon be found among them.