Financing SMEs and Entrepreneurs 2020

45. Switzerland

Key facts on SME financing

Only 0.8% of all Swiss enterprises are large and SMEs continue to dominate the enterprise landscape, constituting 99.2% of all firms.

Switzerland exhibited a real GDP growth of 2.5% in 2018, an increase of 1.4 percentage points from 2017.

Total outstanding SME loans rose by 4.6% in 2018, reaching CHF 441 billion, a higher growth rate compared to the 2017 figure of 2.4%.

Over the 2007-18 period, SME loans expanded by 36.6%, while overall corporate lending rose by 45.4%.

Lending standards remained unchanged in 2018, while demand for credit slightly increased.

The average interest rate charged to SMEs decreased in 2018 to 1.96% after the 2017 increase, while the interest rate spread between large and small companies decreased to 71 basis points.

Venture and growth capital investments experienced in 2018 a 33.8% decrease, following a large increase in 2017.

Crowdfunding activities are increasing rapidly (+38% in 2018), also supported by the lack of specific crowdfunding legislation. Recently, the government has taken steps to make the regulatory framework friendlier to the industry, and particularly to financial technology companies.

Payment delays in the business-to-business sector have significantly decreased over the last few years, from 12 days in 2008 to 6 days in 2018, illustrating that liquidity problems have significantly diminished.

In Switzerland, there are four guarantee cooperatives that help promising SMEs obtain bank loans of up to CHF 500 000. Loan guarantee volumes increased steadily over 2007-2010, declined slightly in 2011, and continued to grow in the following six years. The Parliament amended the Federal Law on Financial Aid for guarantee organisations: since 1 July 2019, the Law allows for guarantees up to CHF 1 million.

Table 45.1. Scoreboard for Switzerland

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
Debt
Outstanding business loans, SMEs	CHF million	323 093	344 840	343 866	363 566	377 630	384 438	404 793	402 346	403 681	412 005	422 065	441 332
Outstanding business loans, total	CHF million	401 647	426 489	433 485	458 689	480 922	489 116	513 631	526 532	525 042	538 709	550 365	583 934
Share of SME outstanding loans	% of total outstanding business loans	80.44	80.86	79.33	79.26	78.52	78.60	78.81	76.41	76.89	76.48	76.69	75.58
Government loan guarantees, SMEs	CHF million	104	148	187	215	210	219	227	238	244	254	255	262
Interest rate, SMEs	%	..	..	2.21	2.11	2.08	2.01	1.99	2.05	2.07	2.04	2.09	1.96
Interest rate, large firms	%	..	..	1.35	1.23	1.16	1.11	1.16	1.16	1.30	1.25	1.30	1.25
Interest rate spread	% points	..	..	0.86	0.88	0.92	0.90	0.83	0.89	0.78	0.79	0.79	0.71
Collateral, SMEs	% of SMEs needing collateral to obtain bank lending	..	..	76.00	75.01	76.56	76.75	74.86	78.78	79.64	79.88	81.86	81.70
Utilisation rate	SME loans used/ authorised	71.00	70.00	71.00	70.00	69.00	71.00	72.00	72.00	71.76	71.68	70.59	70.30
Non-bank finance
Venture and growth capital	EUR million	319.8	300.9	308.5	330.1	227.6	245.8	216.8	237.2	394.3	452.4	1195.9	790.7
Venture and growth capital (growth rate)	%, Year-on-year growth rate	..	-5.91	2.53	7.00	-31.05	8.00	-11.80	9.41	66.23	14.73	164.35	-33.88
Other indicators
Payment delays, B2B	Number of days	12	13	13	11	10	9	9	7	7	7	7	6
Bankruptcies, SMEs	Number	4 314	4 221	5 215	6 255	6 661	6 841	6 495	5 867	6 098	6 684	6 710	6 878
Bankruptcies, SMEs (growth rate)	%, Year-on-year growth rate	..	-2.16	23.55	19.94	6.49	2.70	-5.06	-9.67	3.94	9.61	0.39	2.50

Source: See Table 45.3.

SMEs in the national economy

SMEs, defined as firms with up to 250 employees, constituted 99.2% of Swiss enterprises in 2016, employing 67.0% of the labour force. Micro enterprises constituted 68.0% of all firms, employing 16.7% of the country’s workforce, while large enterprises only comprised 0.8% of total firms. Large enterprises produced 42% of the value added.

Table 45.2. Distribution of firms in Switzerland, 2016

By firm size

Firm size	Number	%
All firms	145 090	100
SMEs (1-249)	143 974	99.23
Micro (1-9)	98 687	68.02
Small (10-19)	25 471	17.56
Medium (50-249)	19 816	13.66
Large (250+)	1 116	0.77

Note: Data includes the business economy except financial and insurance activity. Businesses with 1 or 2 persons employed were not included.

Source: OECD, Entrepreneurship at a Glance (2017).

SME lending

Swiss economy

The Swiss economy fared well during the global financial crisis, having never slipped into a recession and growing faster than most other European economies.

According to the estimations of the State Secretariat for Economic Affairs (SECO), the real GDP growth rate in 2018 stood at 2.5%, following the 1.1% registered in 2017. Growth in the first half of 2018, in particular, was significantly above average. In the second half of the year, the economy weakened noticeably both in Switzerland and abroad. Over 2018 as a whole, manufacturing was the strongest driver of growth. The sector was able to benefit from high international demand for Swiss industrial goods. Most other industries were also able to expand. A major exception is trade, which registered a decline in value added for the first time since 2011.

On the expenditure side, foreign trade provided the greatest impetus for growth. By contrast, domestic demand expanded less strongly. Private consumption, in particular, saw below-average growth, curbed by the weak development of real purchasing power. Investment in construction and equipment also lost momentum compared to 2017.

Lending market

Both total business loans and SME business loans increased in 2018 on a year-to-year basis, by 6.1 and 4.6% respectively, from 2.2 and 2.4%.

With the exception of 2014, SME loans grew each year between 2007 and 2018, achieving a total growth rate of 36.6%. SME loans generally expanded less rapidly than overall business loan growth, which grew by 45.4% during the same period. Consequently, the share of SME loans in total business loans contracted from 80.4% in 2007 to 75.6% in 2018.

Credit conditions

The Banking Lending Survey of the Swiss National Bank indicates that household demand for loans remained constant in 2018, while firms’ demand for loans increased slightly. The Survey also shows that lending standards slightly loosened between 2015 and 2017 and remained broadly unchanged in 2018.

After increasing in 2017, interest rates for loans under CHF 1 million decreased to 1.96% in 2018, reaching their minimum since 2009.

The interest rate spread for loans to SMEs and loans to large firms, proxied by loans of less than CHF 1 million (SMEs loans) and greater than or equal to CHF 1 million (large firms loans), increased between 2009 and 2011 to 92 basis points (bp), before declining to 83 basis points in 2013. Over 2013-14, the interest rate spread increased again to 89 bp but has since then decreased year over year, reaching 71 bp in 2018.

The Banking Statistics of the Swiss National Bank indicate that in 2018, the utilisation rate of credit lines was 70.3%. The percentage of SME loans requiring collateral rapidly increased from 74.9% in 2013 to 81.7% in 2018.

Alternative sources of SME financing

Venture capital

The Swiss venture and growth capital investment market is experiencing strong growth. After a rapid increase in 2015 (+66.2% from 2014) and a moderate increase in 2016 (+14.7%), venture and growth capital investments strongly increased again in 2017 by 164.4%. Approximately EUR 1196 million were invested in Swiss firms, the highest annual amount in the reference period. In 2018 registered a contraction of 33.8% decreasing to EUR 791 million.

The dramatic increase in 2017 can be explained by two large investments in growth stage companies, which together accounted for 68% of the total growth capital investments. This specific situations explain the decrease in 2018 and does not affect the growth observed since 2013. In the last 5 years, the venture and growth capital investments rose by 364.8%.

Later stage venture investments in 2018 decreased by 17% compared to 2017, following a 55% increase of the previous year. The total volume of later stage venture capital dropped steeply (by 41.5%) over 2007-18. On the other hand, seed investment capital continued to grow and experienced a 77% increase in 2018 after the impressive 268% increase in 2017.

In 2018, start-up investments constituted 75.7% of total venture investment, a sharp increase from their 40.1% share in 2007. Cumulatively, start-up investments have increased 52.9% throughout the reference period and 323.7% over 2007-2018.

The Swiss crowdfunding market

The Swiss crowdfunding market is growing rapidly since the launch of Cashare, Switzerland's first crowdfunding platform, in 2008. As of the end of April 2019, there were 37 platforms operating in Switzerland.

In 2018, 6 521 campaigns raised CHF 516.6 million through crowdfunding in Switzerland. The market thus exceeded the CHF 0.5 billion threshold for the first time. Since the first crowdfunding platform's launch in 2008, crowdfunding in Switzerland has been used to raise CHF 1 084.9 million in funds. Around half of this total was raised in 2018. This is a 38% increase in crowdfunding volumes compared to 2017, when CHF 374.5 million were raised. Crowd lending accounted for the bulk of funding volumes followed by crowd investing, which together constituted 90% of the Swiss crowdfunding market in 2018.

Crowd investing experienced the highest growth in 2018, increasing by 52% to CHF 204.9 million, while funds raised through crowd lending rose by 40% to CHF 261.9 million. Rewards-based crowdfunding and crowd donating decreased by 12% to CHF 25.6 million. Invoice trading posted a volume of CHF 24.3 million in 2018, compared to a volume of just CHF 0.4 million only three years before. Advanon is the only invoice trading platform in Switzerland and began its operations in March 2015, which explains the low volumes of 2015.

In terms of regulations, Switzerland does not have specific crowdfunding legislation and crowdfunding is generally governed by the main banking regulations, which can result in many regulatory obstacles. The Federal Council, recognising the importance of innovative financial technologies, revised the Banking Ordinance in 2017 to ensure that barriers to market entry for financial technology firms were reduced and that the competitiveness of the Swiss financial centre was enhanced. This was an important step towards setting-up a fintech-friendly environment in Switzerland.

Another amendment, which concerns the Banking Act (BankA), came into force on January 2019. A new authorisation category has been created under BankA for companies that accept public funds, up to a maximum of CHF 100 million, but do not invest funds or pay interest on funds. The purpose is to simplify authorisation and operating requirements for companies in this category relative to others (who hold typical banking licenses) in the areas of accounting, auditing and deposit protection.

The Federal Council will continue to closely follow other developments in the areas of digitalisation and fintech and examine further regulatory measures, including clarifying the legal nature of virtual currencies.

Other indicators

According to the annual report of Intrum Justitia, business-to-business payment delays have significantly decreased over the last few years, from 12 days in 2008 to 6 days in 2018. This suggests that SMEs’ liquidity problems diminished in Switzerland in contrast to most other European countries, where liquidity problems remain prevalent.

This finding has been confirmed by a study of the State Secretariat of Economic Affairs SECO on the SME credit market, published in June 2017. According to the results of a demand-side survey conducted on a representative sample of SMEs, the credit market in general is functioning well and access to finance in Switzerland is high.

Bankruptcies increased by 2.5% in 2018 after increasing by 0.39% in 2017. The different increases of 2009 (+23.6%), 2010 (+19.9%) and 2016 (+9.6%) can be attributed in part to a new regulation which simplified the de-registration of inactive firms and came into force in 2008.

Government policy response

The federal government assists efficient and viable SMEs in obtaining bank loans by funding loan guarantee cooperatives. These loan guarantee cooperatives enhance SMEs' access to bank loans. The maximum lifetime of a guarantee is 10 years and the maximum guarantee amount per firm is CHF 500 000 (CHF 1 million starting from 1^st of July 2019). Interest rates are set by the banks’ lending funds and depend on the riskiness of the project. In addition to the interest rate, firms typically have to pay a 1.25% commission fee to the guarantee cooperative.

Financing is provided mainly for working capital, expansion, investments or starting a business. In the event of a default, the government refunds 65% of the deficiency to the guarantee cooperatives. By the end of 2018, the number of beneficiaries amounted to 1 822 firms for a total guarantee of CHF 262.4 million. The scheme costs around CHF 170 million in outstanding liabilities for the government and generated CHF 4 million in realised losses from defaults in 2018 as well as CHF 2.1 re-additions from previous losses, which corresponds to a 1.6% net loss ratio. The government also contributes an additional CHF 3 million annually toward the administrative costs of the guarantee cooperatives.

In Switzerland, four guarantee cooperatives help promising SMEs obtain bank loans. Three are regional and one is national and provides its services exclusively to women. Loan guarantees increased steadily over 2007-10, declined slightly in 2011, grew until 2016, remained stable in 2017 and grew again in 2018. Over the reference period, loan guarantee volumes increased by a factor of 2.5, largely due to a restructuring of the guarantee programmes, which increased the amount of risk covered by the government, in turn increasing demand for guarantees.

On 22^nd of May 2019 the Federal Council brought into force the amendment of the Federal Law on Financial Aid for guarantee organisations allowing guarantees up to CHF 1 million from the 1 July 2019.

The Swiss Government is also working to enhance market access for new, innovative financial technologies. The Federal Council wishes to facilitate more innovative forms of financial services. In this respect, three measures have been implemented since 2017.

The extension of the holding period for settlement accounts from 7 to 60 days and an authorisation-exempt innovation area (sandbox) – have already been regulated at ordinance level in the meantime, and came into force on 1 August 2017. The third measure – a new authorisation category with simplified requirements in the Banking Act – came into force on 1 January 2019. With this new measure, companies with special authorisation can accept public funds of up to CHF 100 million from 1 January 2019, provided they neither invest nor pay interest on these funds.

Figure 45.1. Trends in SME and entrepreneurship finance in Switzerland

Source: See Table 45.3.

Statlink

Table 45.3. Definitions and sources of indicators for Switzerland’s scoreboard

Indicator	Definition	Source
Debt
Outstanding business loans, SMEs	Credit lines of all SMEs (firms with less than 250 employees, stocks).	Swiss National Bank database; table selection: Banks, Credit volume, Corporate loans, broken down by company size. Total credit lines excl. total credit lines to companies with 250 or more employees [www.snb.ch]
Outstanding business loans, total	Credit lines of all enterprises (stocks). 2007 and 2008 figures include loans to public law institutions.	Swiss National Bank database; table selection: Corporate loans, broken down by company size
Government loan guarantees, SMEs	Four guarantee cooperatives offer loan guarantees for SME of up to CHF 500'000. The federal government covers 65 % of their exposure and shares in the administration costs.	Administrative data from the guarantee cooperatives
Interest rate, SMEs	Interest rate for new loans at the end of the year for investment loans with fixed interest rates, amounts less than CHF 1 million.	Swiss National Bank database; table selection: Interest rates on new loan agreements, by product and loan amount, mean value in December
Interest rate, large firms	Interest rate for new loans at the end of the year for investment loans with fixed interest rates, amounts more than CHF 1 million.	Swiss National Bank database; table selection: Interest rates on new loan agreements, by product and loan amount, mean value in December
Interest rate spread	Spread between the interest rate at the end of the year for investment loans amounts less than CHF 1 million and equal to greater than CHF 1 million.	Swiss National Bank database: Interest rates of investment loans between CHF 50 000 and 1 million (average) minus interest rates of investment loans between CHF 1 and 15 million (average) in December
Collateral, SMEs	Secured utilisation opposite SME customers in relation to total utilisation opposite SME customers.	Swiss National Bank database; table selection: Banks, Corporate loans, broken down by company size; secured utilisation opposite customers (mortgages and secured loans) in relation to total utilisation of demands opposite customers for SMEs (up to 249 employees, public sector entities included),
Utilisation rate	SME loans used in relation to SME loans authorised	Swiss National Bank database; table selection: Banks, Credit volume, Corporate loans, broken down by company size. Total credit lines and utilisation excl. total credit lines to companies with 250 or more employees [www.snb.ch]
Non-bank finance
Venture and growth capital	Seed, Start-up, late and growth stage capital invested.	Invest Europe (former EVCA Yearbook), European Private Equity Activity Data 2018, Investment- Market statistics by country
Other indicators
Payment delays, B2B	B2B Payment delays	Intrum, European Payment Index, European Payment Report Schweiz 2018
Bankruptcies, SMEs	Number of bankruptcies	Creditreform, Presseletter 5. Juli 2019: Firmen- und Privatkonkurse

References

Creditreform, Presseletter 5.07.2019, “Firmen und Privatkonkurse 2018/2019”, available at: https://www.creditreform.ch/nc/news/news-meldung/news-detail/presseletter-vom-5-juli-2019.html

Federal Statistical Office, “Struktur der Schweizer KMU”, Neuchâtel January 2017, available at: https://www.bfs.admin.ch/bfs/de/home/statistiken/industrie-dienstleistungen/unternehmen-beschaeftigte/wirtschaftsstruktur-unternehmen.assetdetail.1760211.html

Institute of Financial Services Zug (IFZ), "Crowdfunding Monitor Switzerland 2019", available at: https://blog.hslu.ch/retailbanking/crowdfunding/

Invest Europe, “European Private Equity Activity Data 2018”

Intrum, “European Payment Report 2018”, available at: https://www.intrum.ch/de/losungen-fur-unternehmen/news/news-schweiz/intrum-european-payment-report-schweiz-2018/

OECD (2017), “Entrepreneurship at a Glance 2017”, available at: http://stats.oecd.org/Index.aspx?DataSetCode=SSIS_BSC_ISIC4

SECO, Press release 28.02.2019, “Gross domestic product in the 4th quarter of 2018: return to moderate growth”, available at: https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-74140.html

Swiss Federal Council (2012), “Venture Capital in Switzerland”. Bern June 2012, available at: www.kmu.admin.ch/publikationen/index.html?lang=de&download=NHzLpZeg7t,lnp6I0NTU042l2Z6ln1acy4Zn4Z2qZpnO2Yuq2Z6gpJCDe3t3fmym162epYbg2c_JjKbNoKSn6A--

Swiss Federal Council, “Federal Council wants to reduce barriers to market entry for fintech firms”. Bern Media release 2.11.2016 available at: https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-64356.html

Swiss Federal Council, “Federal Council puts new fintech rules into force”. Bern Press release 05.07.2017 available at: https://www.sif.admin.ch/sif/en/home/dokumentation/medienmitteilungen/medienmitteilungen.msg-id-67436.html

Swiss Federal Council, “Federal Council adopts implementing provisions for fintech authorisation”. Bern Media release 30.11.2018 available at: https://www.admin.ch/gov/en/start/documentation/media-releases.msg-id-73186.html

Swiss Federal Department of Economic Affairs (2013), “Switzerland’s SME policy”. Bern October 2013, available at: www.seco.admin.ch/dokumentation/publikation/00035/02389/index.html?lang=en

Swiss National Bank (2013), “Financial Stability Report 2013”, available at: www.snb.ch/en/iabout/pub/oecpub/id/pub_oecpub_stabrep.

Swiss National Bank database; Table 3.selection: Banks, Corporate loans, broken down by company size, available at: https://data.snb.ch/en/topics/banken#!/cube/bakredbetgrbm

Swiss National Bank database; Table 3.selection: Banks, Corporate loans, broken down by company size; secured utilisation opposite customers (mortgages and secured loans) in relation to total utilisation of demands opposite customers for SMEs (up to 249 employees, public sector entities included), available at: https://data.snb.ch/en/topics/banken#!/cube/bakredbetgrbm?fromDate=2015-12&toDate=2017-12&dimSel=D0(AV1),D1(KC5A,KC5B,KC5C,KC5E),D2(T1,H,G),D3(F)

Swiss National Bank database; Table 3.selection: Interest rates, Interest rates on new loan agreement, Investment loans with fixed interest rates, by product and loan amount, mean value in December, available at: https://data.snb.ch/en/topics/ziredev#!/cube/zikredvol?fromDate=2015-12&toDate=2017-12&dimSel=D0(FI),D1(K50000100000F,K100000500000F,K5000001MF,K15MF,K515MF),D2(MP0)

State Secretariat for Economic Affairs SECO, “Studie zur Finanzierung der KMU in der Schweiz 2016”. Bern June 2017, available at: https://www.newsd.admin.ch/newsd/message/attachments/48939.pdf

State Secretariat for International Finance SIF, “Initiation of consultation on amending Banking Ordinance (fintech authorisation)”. Bern June 2018, available at: https://www.sif.admin.ch/sif/en/home/dokumentation/medienmitteilungen/medienmitteilungen.msg-id-71239.html