How SME with financing needs benefit from digitization
by Teddy Amberg*
Bank appointments used to be part of an entrepreneur’s everyday life. Loans, mortgages, credit cards, cash management, annual accounts – often nothing went without the helping hand of the consultant. Thanks to innovative, digital services, entrepreneurs now have more time for the really important things.
What has long been the case for individuals is now becoming more and more valid for SME: Thanks to the digitization of the financial sector, bank transactions can be handled almost entirely from computers or smartphones. Whether fintech companies with innovative, partly disruptive business models or traditional institutes: It has been recognized how customer needs have changed – and responded with appropriate services. These not only save time, but also money.
This is particularly true for the credit or financing sector, which was well known for high interest rates and lack of transparency. Thanks to peer-to-peer credit platforms such as CreditGate24, this belongs to the past.
4 Reasons for financing via peer-to-peer platforms for SME
- 1. Low & transparent administrative costs
Thanks to automated procedures and a lean cost structure, the administrative costs for peer-to-peer credit platforms are lower than for conventional providers – and above all transparent: They normally require a fixed percentage of the annual loan amount (at CreditGate24 between 0,6% and 0,8%) from the lenders and borrowers. They offer the all-round package for this: Clarification of creditworthiness, processing of loan payments, digital accounting, if necessary collection. Since the administrative expenses are displayed transparently, it is also clear how much the debt interest is actually.
- 2. Attractive conditions
In the peer-to-peer model, borrowers are brought together directly with interested investors, without expensive administrative apparatus in between. This makes the conditions better for both parties and creates a win-win situation: The borrower receives a lower interest rate (at CreditGate24 between 4% and 8% on average) and the investor receives more than on the saving account.
- 3. Uncomplicated processing, no waiting times
Thanks to a standardized risk assessment and an automated procedure, credit applications can be processed quickly. Normally, it does not take 24 hours to make the decision. After the project has gone online, financing is possible within 24 hours.
- 4. Tax savings
Debt interest can be deducted from taxes (this also applies to traditional loans). Especially SME with promising product offerings need capital to grow. The lower the interest rate environment, the more worthwile it is to consider taking debt capital rather than equity. In addition to tax, debt capital has another important advantage: The entrepreneur can determine the further operative steps himself.
Whether you want to invest in fixed assets, plan a takeover, require new employees or want to refinance – peer-to-peer credit platforms have customized solutions for every need.
*Teddy Amberg is partner at CreditGate24 and is responsible for business development.