Myriam Reinle is CEO of Lendico Schweiz AG (Switzerland). After graduating with a master's degree in business administration from EDHEC in Lille (France) she came to Switzerland for a marketing position at UBS. For the past 15 years she has been leading or consulting existing or starting up e-commerce companies. She has tested and honed her expertise in various industries, either as CEO of car4you (automotive), or previously with jobup (work placement) and homegate (real estate).
Ms Reinle, Lendico Schweiz AG, a joint venture with PostFinance, provides a crowd-lending platform service. What exactly do you offer to members of the NetComm Suisse e-Commerce Association?
Reinle: As a digital alternative to banks, Lendico brings together investors and small and medium-sized Swiss companies (SMEs) that have financing requirements through an online lending marketplace. For members of the NetComm Suisse e-Commerce Association Lendico is an alternative source of finance or an attractive investment. Until now investing in company loans has usually only been possible for large institutional investors.
What are the major advantages of this service over traditional bank loans?
Reinle: Speed and a lean, digital process. The application process, from the initial contact to the payout of the loan, is carried out largely online, which allows us to make fast, cost-efficient lending decisions. The loan application and the credit assessment are free and non-binding for the borrower. To accurately establish the borrower’s credit rating, Lendico relies on its own credit assessment and scoring. Thanks to efficient, technology-based processes, this is normally significantly faster than at a bank: with Lendico, borrowers obtain a loan decision and offer within 48 hours. We can offer loans between 10,000 and 500,000 Swiss francs over periods of up to five years. If the applicant accepts the proposed conditions, the loan is financed and paid by investors. Lendico works with a large number of private and institutional investors to finance these loans. The borrower is only liable for fees once the loan amount has been paid out.
Another important advantage over bank loans is that borrowers can pay back the loan at any time without pre-payment penalties if their financing situation changes.
Why are you targeting Swiss SMEs in particular?
Reinle: There are two reasons for this. Firstly, we are noticing how the financing climate has become tougher, especially for mid-sized businesses. A lot of banks have become hesitant to give loans to SMEs because their lending processes are often complex and expensive, and their IT systems out of date. We are keen to offer an alternative to that. Secondly, we have seen that the loan amounts normally needed by mid-sized companies can be quickly raised by private and institutional investors. A number of e-commerce companies in Switzerland belong to the SME category and they are facing exactly this challenge – the traditional banks simply don’t cater to them enough.
What kind of problems are SMEs coming to you with?
Reinle: Mid-sized companies often come to us because traditional loan financing simply takes too long, preventing them from taking advantage of time-sensitive opportunities. This is a situation faced by many high-growth e-commerce companies: the financing framework offered by banks is too rigid. Furthermore, Lendico loans are used to repay expensive overdrafts or factoring finance. Finally, companies often choose Lendico because they want to establish a financing alternative to their principal bank. A large number of mid-sized companies suffered during the last financial crisis as a result of the widespread credit crunch and they are now looking to secure borrowed capital from sources other than the banks.
How does Lendico ascertain a borrower’s credit rating?
Reinle: To allow us to accurately establish a borrower’s credit rating, applicants – once they’ve registered their personal information – have to go through a multi-step filtering process. We use various sources of data for this. Due to our efficient, technology-based processes, the credit assessment is completed far more quickly than is the case with banks. If, after the detailed analysis within the scoring framework, everything speaks in favor of the loan application, the applicant receives a conditions proposal for the amount requested.
What kind of data do the SMEs have to provide as part of the loan application?
Reinle: In the first step of the application they have to submit financial statements in accordance with the Swiss Company Register (HR), annual financial statements (balance and P&L) for the last two financial years, and a current business assessment. Ideally the documents are scanned and sent by email. Exclusion criteria that result in the automatic rejection of applications in this first stage include operations in certain industries (e.g. gambling), a business that has not been operating for long enough, or a turnover that is too low (below €50,000).
And yet most loans are still issued in bank branches. Isn’t it unrealistic to expect this to change any time soon?
Reinle: The fact that there are fewer and fewer advisors and branches seems to suggest otherwise. The Boston Consulting Group expects a further 25 percent of bank branches to close over the next few years. What a lot of people fail to realize is that this is a trend that is being actively driven by customers. The banking sector is no different in this regard to other industries in which a growing percentage of business is done online. The majority of banking customers are increasingly using digital channels and go into a branch once a year at most. We find that the vast majority of our loan customers are very satisfied with our online-based process. The number of borrowers that return to us for further financing is also increasing. So we can certainly talk of a relationship based on trust. The online-based process also offers a number of advantages for the companies. The online “branch” never closes and customers can take care of their loan applications whenever it suits them, e.g. in the evening or on the weekend. It also means they needn’t travel to a branch, saving them valuable time.
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