How do you get a business loan in Switzerland?
A business loan is a financing solution for companies to cover short- or long-term capital requirements. Business loans are also known as corporate loans or SME loans. The loans are aimed at legal entities such as GmbHs and AGs.
There are different types of corporate loans: Short-term loans, such as overdrafts and supplier credits, cover immediate liquidity needs, while long-term loans are used for larger investments, such as purchases of fixed assets. Special forms, such as property loans, are linked to the purchase of specific assets. Peer-to-peer lending and mezzanine capital are alternative financing options for businesses.
The requirements for a business loan include a detailed business and investment plan, a stable financial situation of the company, and sufficient collateral.
The application process includes the preparation and submission of these documents, the selection of the lender, thorough consultation, and finally, the loan decision.
In Switzerland, microfinance institutions and online lending platforms offer specialized business loans alongside banks and traditional credit institutions.
The cost of a business loan is made up of interest rates and various fees, with the total cost being extremely dependent on the creditworthiness of the company.
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What is the definition of a corporate loan?
A corporate loan (business loan) is a form of credit designed for companies to cover their short-term or long-term capital requirements. This ranges from financing ongoing operations to purchasing new equipment and expanding the business. In contrast to personal loans, which are granted to individuals, corporate loans are aimed exclusively at legal entities (limited liability companies, public limited companies, etc.) or sole proprietorships.
The granting of credit depends on the company’s creditworthiness, which is based on several variables, including turnover, profit, business history, and the credit histories of the company and its owners. The terms of the loan, including the interest rate, duration, and repayment schedule, vary depending on the credit institution and the creditworthiness of the company. In Switzerland, it is typical for corporate loans to have guarantees or collateral to lower the risk for the lender.
What types of corporate loans are there?
Corporate loans are divided into short-term and long-term loans. The following image shows the exact subcategories.
Short-term loans are generally designed to cover immediate liquidity needs. This includes, for example, the overdraft account, which is a type of bank account that lets you spend more money than you have in your account. Supplier credit is another form of short-term credit where suppliers grant their customers (i.e., companies) deferred payment, allowing them to receive goods or services immediately but pay later.
Long-term credit, on the other hand, is intended for more extensive financing needs, such as investments in fixed assets or long-term projects. An example of this is the typical loan everybody knows, which is usually designed with a fixed repayment schedule and interest rate over a longer period of time.
Property loans are a special category of long-term loans linked to the purchase or use of specific assets. These include, for example, mortgages for the purchase of real estate and lombard loans, which are granted against the pledging of securities or other assets.
An innovative form of lending is peer-to-peer lending, which bypasses the bank and enables loans to be granted directly between private people via online platforms. Both lenders and borrowers benefit from more favorable conditions than with traditional bank loans.
Another interesting form of financing is mezzanine capital, a mixture of equity and debt capital.
What is a microloan?
A microloan is a type of corporate loan characterized by relatively small loan amounts and short terms. Originally, microloans were designed to promote entrepreneurship and self-employment in developing and emerging countries. However, since the late 1990s and early 2000s, microloans in Switzerland have also gained popularity, particularly among small entrepreneurs and start-ups.
The amount of a microloan ranges from a few hundred to several tens of thousands of francs. Although microloans have higher interest rates than traditional business loans, they provide an important source of funding for businesses that would otherwise not have access to finance.
What are the requirements for a business loan?
The requirements for a business loan are similar to those for a personal loan, but some additional documentation must be submitted. To get a business loan, you must score well on the following 4 criteria.
- Business plan
- Investment plan
- Stable financial situation
- Collateral
1. Business plan
A business plan is a fundamental requirement for applying for a business loan in Switzerland. It serves as a roadmap for your company by detailing your business idea, goals, market analysis, competitive strategies, management team, and financial projections. Lenders use the business plan to evaluate the potential of your business and assess the associated risk.
A compelling business plan defines your business objectives, target markets, and potential customers. It should also include a SWOT analysis (strengths, weaknesses, opportunities, threats) that demonstrates your market knowledge and strategic direction. In addition, detailed financial sections, including profit and loss statements, cash flow projections, and balance sheets, are important to demonstrate your financial planning.
There are numerous advisers and tools if you still need a business plan. For example, you can create one free of charge at “Businessplanner.ch”.
2. Investment plan
An investment plan is closely linked to the business plan and focuses specifically on the planned expenditures and investments financed with the loan. This plan contains detailed information about the purchase of fixed assets, the increase in working capital, or all the other projects necessary to achieve your business goals.
Lenders expect you to be able to clearly outline the need for investment, including the cost-benefit analysis for each major planned expenditure. The investment plan also includes timelines for implementing the investments and expected returns or improvements in business efficiency.
3. Stable financial situation
Credit institutions in Switzerland carefully assess the financial stability of a company before granting a business loan. Key factors for existing companies include healthy liquidity and solid profit margins. Companies must be able to prove through their financial records that they have a steady income and can cover their current liabilities as well as the new loan installments.
Before granting a loan, all Swiss lenders perform a credit check, which includes analyzing financial statements, tax returns, and other relevant financial documents. A positive cash flow and a good credit history will strengthen the lender’s confidence in the company.
4. Collateral
Collateral serves as insurance for lenders if the company cannot repay the loan. It is provided, for example, in the form of real estate, equipment, stock, or other valuable company assets. The provision of collateral is a common part of the lending process in Switzerland, especially for larger loan amounts or if the company’s financial situation is considered somewhat risky.
The collateral valuation is based on its current market value and saleability, i.e., how much it could be sold for. Some lenders also accept personal guarantees from the business owners as collateral.
How do you apply for a business loan?
Applying for a business loan in Switzerland involves several steps aimed at convincing lenders of the creditworthiness and potential of your business. Here is a step-by-step description of the application process.
- Preparation of the documents
- Selection of the lender
- Initial meeting and consultation
- Submission of the loan application
- Assessment and review
- Credit decision
- Contract and disbursement
Start repaying the loan according to the agreed schedule and pay on time to maintain your credit rating and secure future financing options.
1. Preparing the documents
Before you submit an application, gather all the necessary documents. This includes your business and investment plan, the most recent annual financial statements, current business analyses, tax returns of the company and the owners, and evidence of collateral. Complete and well-prepared documentation makes it easier for lenders to assess your application.
2. Selecting the lender
Research different lenders to find the best terms for your business. These include traditional banks and credit institutions, online lending platforms, and specialized microfinance institutions. Compare interest rates, fees, terms, and flexibility of repayment options. More on choosing a lender is further below.
3. Initial meeting and consultation
Arrange a consultation with the lender to discuss your financing needs and possible loan options. Be prepared to explain your business model and plans for using the loan. This is also the time to ask questions and clarify details about the terms of the loan.
4. Submission of the loan application
Submit your loan application together with all the required documents to the lender. Make sure your application is complete to avoid delays in the evaluation process. Normally, you can submit the application during the consultation.
5. Assessment and review
Once your application is submitted, the lender will conduct a detailed assessment. This includes a review of your finances, an evaluation of the collateral provided, and a credit check of the company. Depending on the company’s creditworthiness, you will receive a rating based on which the interest rate will be determined. The exact rating depends on the lender. Here are three examples.
- UBS uses 15 debtor categories (from C0 to D4).
- Credit Suisse uses 19 categories (from CR01 to DCR).
- The cantonal banks use around half a dozen categories.
6. Credit decision
Once the check has been completed, the lender will decide on your loan application. This takes a few days to a few weeks, depending on the lender and the complexity of your application.
7. Loan agreement and disbursement
If the decision is positive, you will be informed of the loan terms and receive the loan agreement to sign. Please read the contract carefully before you sign it. Once the contract has been signed, the loan amount will be transferred to your business account.
How do business and personal loan applications differ?
The application process for corporate and personal loans is very similar, although more details are required for a corporate loan due to the higher loan amounts involved. In contrast to personal loan applications, corporate loans usually require collateral. With business loans, lenders take into account the financial situation of the owners as well as the creditworthiness of the legal entity (the company).
Who grants corporate loans in Switzerland?
Banks and specialized credit institutions grant corporate loans in Switzerland. However, banks prefer to grant corporate loans to well-established AGs or GMBHs and require a high degree of security. Among the credit institutions, some raise the loan amount themselves and some finance the amount via so-called crowdlending.
The following subsection contains a tabular comparison of corporate loans. For a comprehensive perspective on the entire spectrum of lenders in Switzerland, we invite you to read the article on this topic.
Business loan comparison
The following table shows the Swiss credit institutions that offer business loans. Banks such as the cantonal banks are not listed, as they only publish minor details of their credit conditions. The table is sorted by the most favorable interest rate, but you should, of course, have low total costs in mind.
Provider | Loan amount | Loan term | Interest rate | Fees |
---|---|---|---|---|
Swisspeers | 50,000 – 1,000,000 CHF | 6 – 60 months | 2.5% – 13.5% | Initial fee for A-rating: 1%, but min. CHF 2,000. Initial fee for B/C/D rating: 1.25%, but min. CHF 2,850. |
TP24 (Tradeplus24) | 100,000 – 3,000,000 CHF | Term: unlimited, notice period: 2 months | 4.0% – 7.0% | One-off initial fee on the loan. Plus fees of 0.2% per quarter. |
Lend | 25,000 – 1,000,000 CHF | 12 – 48 months | 4.5% – 10.95% | 0.8% – 1.50% fees per year. |
creditworld | 100,000 – 25,000,000 CHF | 6 – 60 months | 3.0% – 10.0% | 1.35% – 1.50% initial fee. Plus fees of 0.35% – 1.95% per year. |
Crowd4Cash | 5,000 – 1,000,000 CHF | 3 – 60 months | 5.0% – 9.0% | 0.8% fees per year. |
GG24 Group | from CHF 10,000 (no maximum amount) | 1 – 36 months | 5.3% – 11.6% | 3.5% fees on the amount. Repayment before or during the term. |
Cashare | 1,000 – 1,000,000 CHF | 1 – 60 months | 5.5% – 13.0% | 0.75% to 1.5% fees per year. |
What are the costs and fees?
The costs and fees of a business loan in Switzerland are made up of the interest rate and processing fees (also known as start-up fees, service fees, or set-up fees). Fees for early repayment are also possible with corporate loans, and, of course, there are also reminder fees in the event of late payment.
Interest rates for corporate loans are between 2% and 14% with Swiss providers. The processing fees are between 0.2% and 4%. Depending on the provider, the processing fees are charged once, per quarter, or per year.
The total cost depends on the lender and factors such as the borrower’s creditworthiness. It is, therefore, advisable to make a non-binding inquiry with the credit institution to obtain precise information about the expected costs.
What support programs does the state offer?
Switzerland has various subsidy programs and support offers for companies wishing to take out a corporate loan. The programs aim to support the establishment and growth of companies, especially in sectors considered strategically important for the economy. Below are the 4 most noteworthy funding programs.
- Innovation promotion
- Guarantees
- SECO Start-up Fund (SSF)
- Hotel loans from the SGH
1. Innovation promotion
If you consider your company particularly innovative, you may be eligible for support from Innosuisse, an organization that promotes technology and innovation in Switzerland. For more information, visit Innosuisse.ch.
2. Guarantees
Federally supported guarantee cooperatives make it easier for small and medium-sized enterprises (SMEs) to obtain financing from banks by acting as guarantors. Switzerland has four such organizations, including three regional cooperatives and a national cooperative specifically geared towards women.
- SAFFA Bürgschaftsgenossenschaft, focused on women.
- BG Mitte, a cooperative that supports SMEs.
- Cautionnement romand, covers French-speaking Switzerland.
- BG OST-SÜD, also provides support for SMEs.
The cooperatives guarantee loans of up to CHF 1 million, with the state covering up to 65% of the risk of loss absorption. Applications for guarantees must be submitted directly to the respective guarantee cooperatives.
3. SECO Start-up Fund (SSF)
The SECO Start-up Fund (SSF) offers loans for people who want to set up or promote a company abroad. It offers loans that cover up to two thirds of the investment costs in the target market, but not more than twice the amount provided by investors, and only up to a maximum amount of CHF 500,000. The loans must be repaid within seven years.
Investors based in Switzerland with a good reputation who wish to support the establishment of a company or its initial growth phase within a maximum of six years in one of the developing or emerging countries considered a priority by SECO are eligible for financing from the SSF. A list of these countries can be found on the fund’s website.
4. Hotel loans from the SGH
The federal government supports companies in the tourism sector with the help of the Swiss Society for Hotel Credit. The organization offers low-cost loans and specifically targets the accommodation sector. Through this support, the state aims to increase the quality and attractiveness of the Swiss hotel sector.
SGH, a cooperative partially financed by federal funds, focuses on hotels in tourist areas subject to strong seasonal fluctuations. Despite a solid financial performance, these companies are often unable to independently finance necessary investments in their infrastructure due to a lack of equity reserves.
What are the legal framework conditions?
Switzerland’s legal framework for corporate loans is less strict than for personal loans. The Code of Obligations, the Commercial Register Act, and the Bankruptcy Act are particularly relevant for corporate loans, while the Consumer Credit Act governs almost all matters relating to personal loans.
1. Code of Obligations
The Swiss Code of Obligations is the central legal basis for credit agreements. Articles 312 et seq. of the CO regulate the details of loan agreements, including the requirements for the form of contract and the basic obligations of the contracting parties. For larger loan amounts, a written agreement is required that clearly defines all essential loan conditions.
2. Commercial Register Ordinance
Important transactions and collateral associated with business loans must be registered in accordance with the Commercial Register Ordinance. This is particularly true when collateral such as mortgages plays a role, as such entries secure the lender’s rights and create transparency.
3. Bankruptcy law
In the event of the borrower’s insolvency, the bankruptcy law comes into play. This law determines how the assets are to be liquidated and in what order creditors are compensated.