The popularity of alternative financing options for SMEs  

The popularity of alternative financing options for SMEs  

Our analysis of financing instruments included a wide range of indicators. For example, we looked at the expected development of turnover and the number of employees on the type of financing chosen, in addition to company size.  

The two already most popular forms of financing have grown the most. Both in 2016 and 2022, these are leasing and private loans. For these, the share of use grew from 13 to 25 percent and 15 to 23 percent, respectively. Crowdfunding / private debt and private equity have grown strongly in percentage terms but are still at a low level.  

Use of different forms of financing 2016 and 2021

The use of alternative financing instruments can hardly be deduced from the size of the company. Only leasing is used almost twice as often by larger SMEs as by smaller firms (39% versus 22%). For the other five alternative financing instruments examined, no marked differences by company size can be observed.  

Use of different forms of financing by company size 2021

The use of alternative forms of financing is related to the expected development of the company. A good 60% of SMEs with positive growth prospects use alternative financing instruments (Figure 13). This is significantly more than among SMEs with a stagnating or slightly declining outlook (39%).  

The effect of alternative financing is primarily driven by smaller SMEs. These seem to use private loans, leasing, supplier credits, etc., significantly more often in the growth phase than those with a stagnating or declining outlook.  

Use of different forms of financing by growth phase 2021

Conclusion: The greatest difference in prevalence is seen in leasing and private loans. Growing SMEs make significantly more use of these two financing instruments than SMEs with stagnating or declining expectations of turnover and employee numbers. For the other financing instruments, the differences in frequency of use by growth expectation are small.  

Comparison of the use of financing instruments  

Another way of looking at this is to compare alternative financing instruments and bank financing. The data basis is somewhat imprecise for some forms of financing – especially for private loans. According to a rough estimate, it can be assumed that the cumulative volume of alternative financing is similar to that of bank loans (including mortgages).  

On average, alternative investments account for about 40 percent of the volume of debt financing or a quarter of the total balance. Factoring accounts for the smallest share, with a volume of around CHF 0.5 billion. The cumulative market size of crowdlending and private debt is likely to be around CHF 3 billion. We estimate the stock of private equity capital among Swiss SMEs at around CHF 15 billion. Leasing is widespread, but the average amounts are only around CHF 100,000. We estimate the total leasing stock at just under CHF 10 billion, which is lower than supplier credits with a volume of CHF 45 billion.   

We see the highest amount in loans from families, friends, shareholders or partner companies. Here we estimate the outstanding volume at around CHF 250 billion. In total, the volume of alternative financing models in Switzerland for SMEs is, therefore, likely to be a good CHF 300 billion.  

The findings come from a study published by Pactum AG in cooperation with the Lucerne University of Applied Sciences and Arts. The content of the study focuses on Alternative SME Financing in Switzerland (only in German):