Lending platforms automate and accelerate lending.
(Photo: dpa)
Berlin When the loan negotiations with his house bank dragged on too long, Pascal Schiefer took action. The managing partner of Carl Leipold GmbH, which manufactures turned parts for companies from various industries, secured bridging finance via the online credit marketplace Creditshelf.
Creditshelf is now a component in the financing strategy, Schiefer told the Handelsblatt. The family business from the Black Forest, which employs 340 people and has a turnover of around 58 million euros, later took out another loan of 2.5 million euros.
Digital credit marketplaces such as Creditshelf are currently still operating in a niche. In a representative study from the middle of this year, KfW put the proportion of the credit volume that SMEs accessed via digital credit platforms between 2018 and 2019 at two percent. That corresponded to an absolute sum of around 3.4 billion euros. In an analysis, Solarisbank and Barkow Consulting estimate that digital loans can achieve a market share of seven percent in the medium term.
There are currently around 20 digital loan providers who, depending on their character, act as a marketplace, comparison or sales platform. The market is on the move. Providers like Funding Circle have given up, Bitbond has returned its Bafin license for investment brokerage, which brokered loans to the self-employed and small business owners.
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Digital credit marketplaces have an advantage over banks and savings banks, many of which are also becoming more cautious in lending due to increasing regulation: They make quick decisions. Creditshelf can obviously score points: The new business volume of the digital financing platform for companies, which has been listed in the Prime Standard of the Frankfurt Stock Exchange since 2018, rose in the first nine months by 58 percent to around 111 million euros.
Creditshelf wants to grow significantly in double digits
Industry circles consider a volume of around 150 million euros to be realistic for the entire year. Daniel Bartsch, Head of Market at Creditshelf, believes that significant double-digit annual growth rates are quite possible in the medium term.
According to Constantin Fabricius, Managing Director of the Association of German Credit Platforms, the new EU Swarm Financing Regulation (ESCPR) should provide momentum in digital SME financing. It recently came into force and enables corporate loans to be granted directly via credit platforms up to a value of five million euros.
The latest Basel proposals by the European Commission will mean that more and more banks will withdraw from the segment, predicts Fabricius. “The institutions can simply no longer afford SME financing due to the additional capital requirements.” Loan platforms could fill this gap.
For many banks, loans to small and medium-sized enterprises (SMEs) are already unattractive. According to an analysis by Barkow Consulting and the Swiss Teylor AG, the return on equity on SME loans is 3.7 percent on a long-term average and thus below the banks’ equity costs of an estimated eight percent.
Therefore, Bartsch from Creditshelf does not necessarily see banks and online credit marketplaces at a clinch for customers. “We have meanwhile concluded sales alliances with various savings banks, Volksbanks and major banks, especially Commerzbank,” said the market director. These institutes would refer customers to Creditshelf who, for various reasons, cannot or can only partially be used by the institutes themselves.
Profit from brokered credit volume of 200 million euros
Alternatively, Creditshelf can help banks that want to launch a digital product. “I could imagine co-branding here. We then stand behind the product with our infrastructure.
One third of the loans at Creditshelf are refinanced through investors directly via the platform, one third through FIBR Bank and one third through our own loan fund, in which the European Investment Fund acts as an anchor investor. The listed company itself is already targeting the black. “With a brokered loan volume of 200 million euros, break-even is within reach,” says Bartsch. The chances are good in the next two years.
Creditshelf is responsible for the risk assessment of SME loans, but the partners take the credit risks into their own books. The gross return before loan defaults and servicing is nine percent, net investors can, according to Bartsch, expect a “stable four to six percent”.
The loan financing partner FIBR Bank (formerly Amsterdam Trade Bank) is obviously convinced of the business model. A few weeks ago, the institute doubled the volume of its investment in the platform managed by Creditshelf to 120 million euros.
More: Bundesbank sees no problems with SME financing through the Basel reform.