Two out of three medium-sized companies in Germany fear that the digital transformation of their operations could overtax them financially. This is one of the most central findings of the study “Financing Monitor 2019”. We interviewed a total of 200 financial decision-makers from medium-sized industrial, commercial and service companies.
However, digitization is not just a construction site for SMEs, but also one of the banks. Fintechs can represent a real opportunity for both SMEs and established financial institutions.
Financing – the bottleneck of digitization
In 72% of the respondents of the Financial Monitor, Industry 4.0, Artificial Intelligence and Co. have an important or even very important importance for investment planning. At the same time, two out of three companies fear that the factor financing could become a bottleneck in digitizing their business. In addition, every second company has worse access to credit than twelve months ago. In order to close the resulting credit gaps, ie, to procure capital for digitizing the company, the search for alternative financings is becoming more and more important alongside traditional bank lending. Financial experts also advise this and encourage mid-sized companies to diversify their financing mix. Just as one should not concentrate on a large customer when selling as possible, one must set up in the purchase of financing wide. Fintechs are currently proving to be a megatrend.
This is how digital financing platforms work
In the last few years, online financing platforms have been increasingly established as a result of digitalization, including creditshelf. Based on the credit analysis methodology, this platform ensures a free review and processing of loan requests. For small and medium-term loans with a volume of EUR 100,000 to 5 million and maturities of up to 60 months can be arranged for SMEs. For this purpose, the financial experts check the creditworthiness with the help of algorithms. This review process is done digitally and automatically at crucial points – but ultimately the final decision at creditshelf is always human.
A few steps to the credit decision:
- The offer of creditshelf is aimed at these companies
- Established medium-sized companies, market-proven business models, accounting companies (HGB)
- Company history of at least three years
- Exclusion industries: renewable energy, ships, automobile trade / repair
- Turnover> 2.5 million EUR, stable or growing
- EBITDA> zero
- Equity> zero, no over-indebtedness in the balance sheet
- Creditreform Score <300
What is being examined for the determination of the creditworthiness?
First of all, there is a preliminary check based on the information and documents provided. First, the basic creditworthiness and capacity are checked. In doing so, the balance sheet, profit and loss account as well as economic evaluations are considered and, among other things, a look at business accounts is made. As part of the analysis, the digital SME financier creates a credit score. The approach is based on a comprehensive, in many aspects automatic and algorithm-based analysis of various data sources. The focus is not only on the historical financial data – corporate planning is also part of the sound lending decision. A software evaluates the business figures of the past three years and the current fiscal year, identifies historical trends and creates a forecast from them. Analysts and Corporate Accounters receive this information in the form of meaningful analysis and engage in personal dialogue with corporate executives to discuss the findings and, if appropriate, address open issues. This additional information then flows into the decision on the yes or no of a credit arrangement.
Banks and Fintechs: Trend is towards cooperation
A digital financing platform can set itself apart from banks in terms of speed: If a classical institute sometimes requires months for approval and payment, online service providers usually check and decide in a few days. Also, the subsequent payment happens at short notice as desired. In view of this speed and the digitization pressure, which does not stop at banks, it is no surprise that in the meantime, almost every major bank cooperates with fintechs.
A quick, easy source of capital for small and medium-sized enterprises and the implementation of digital credit processes in banking institutions: These opportunities show that the fintech scene is anything but a short-lived trend, but rather a serious, enduring partner in the SME finance market can be considered.
Also published on Medium.