Survey: Germany's SMEs Regard Lending Through Online Marketplaces as a New Alternative
For Germany's small business owners, online marketplace lenders are becoming more and more of an alternative to their main banks. This is the result of a survey conducted by HHL Leipzig Graduate School of Management. A total of 104 SMEs, which applied and/or received loans from online marketplace lender Funding Circle Germany, were interviewed for the study. The digital platform is used by private and institutional investors to finance loans to German enterprises.
The demand for faster, more flexible and simpler financing than that available through a regular bank has been the crucial factor for the growing interest in lending through digital marketplaces. The respondents listed the high level of transparency of the process and the demand for broader diversification of funding as further reasons. According to the survey, the small business owners are dissatisfied with their banks mainly because of the bureaucracy, the financing pace as well as the required collateral. However, financial aspects, such as lower interest rates and fees, seem to play a subordinate role in the decision to change providers.
"For many SMEs the main bank remains their first port of call for funding, but particularly those small business owners who have received funding from a marketplace lender before consider it almost as important as their bank," says Dr. Erik Maier, survey manager and Junior Professor of Retail and Multi-Channel Management at HHL.
The survey also proves that companies do not use granted loans as a lifeline or residual financing, as such, for declined loans. While the majority of the participants assess the financing environment as difficult, the companies do not list it as the reason for the change.
Several factors indicate positive growth regarding the overall future development of German online marketplace lenders. Firstly, the continental European market shows a significantly higher growth rate than the one in the UK, which is Europe's largest market at 85 percent. Secondly, the volume of granted loans is expected to at least partially catch up to the UK level. There, a volume of more than GBP 2.5 billion was financed as opposed to EUR 0.7 billion in Germany.
About the survey
In September 2015, borrowers of the Funding Circle Germany online marketplace lender were interviewed; 54 of them had received funding. They are part of a group of small businesses with about ten employees, annual sales of under EUR 1 million and funding requirements of under EUR 100,000.
The survey in German language entitled "Mittelstandskredite in Zeiten des digitalen Wandels – Crowdlending in Deutschland" ("Loans for Small and Medium-Sized Businesses in Times of Digital Change – Crowdlending in Germany") is available for download at: http://www.hhl.de/crowdlending-in-deutschland
About HHL Leipzig Graduate School of Management
HHL is a university-level institution and ranks amongst the leading international business schools. The goal of the oldest business school in German-speaking Europe is to educate effective, responsible and entrepreneurially-minded leaders. HHL stands out for its excellent teaching, its clear research focus, its effective knowledge transfer into practice as well as its outstanding student services. The courses of study include full and part-time Master in Management as well as MBA programs, a Doctoral program and Executive Education. According to the Financial Times, HHL ranks first in Germany and fifth globally for its entrepreneurship focus within the M.Sc. and EMBA programs. HHL is accredited by AACSB International. http://www.hhl.de
About Funding Circle
Funding Circle is the world’s leading online marketplace for lending to companies. Our platform joins small businesses in need of funding with investors wishing to invest in the UK, the US and Europe. Since its foundation in 2010, more than 50,000 private and institutional investors as well as public organizations have supported about 15,000 companies in realizing their projects with more than EUR 1.8 billion. Funding Circle was the first online marketplace lender to announce an official partnership with the British bank Santander UK. As part of this cooperation, funding requests from smaller companies are forwarded directly to the digital platform. A similar agreement has been concluded with the credit institution RBS. Funding Circle is also supported by experienced investors with investments in Facebook, Twitter and Airbnb. Up to now, over EUR 250 million in capital resources have been raised. http://www.fundingcircle.com/de