Financing SMEs and Entrepreneurs 2022

43. 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 decline of 2.9% in 2020, 0.8 percentage points more than at the time of the financial crisis in 2009 (-2.1%).

Total outstanding SME loans rose by 5.3% in 2020, reaching CHF 487 billion, an even higher growth rate compared to the 2019 figure of 4.9%. This increase can partly also be attributed to the package of measures to mitigate the economic impact of the COVID-19 crisis.

Over the 2007-2020 period, SME loans expanded by 50.1%, while overall corporate lending rose by 61.3%.

Lending standards remained broadly unchanged in 2020, while household and firm demand for credit increased according to the Surveys on bank lending of the Swiss National Bank.

The average interest rate charged to SMEs has been decreasing since 2018, reaching 1.76% in 2020, while the interest rate spread between large and small companies decreased to its minimum since 2007, to 47 basis points in 2020.

Venture and growth capital investments experienced in 2020 a 47.2% decrease, following a large increase in 2019.

38 active crowdfunding platforms are currently operating in Switzerland. The volumes reported by these platforms have again exhibited a positive trend in 2020. The market in 2020 was strongly impacted by the COVID-19 crisis. On the one hand, volumes in the reward-based crowdfunding/crowd-donating segment grew strongly: the fundraising, which in many cases benefited SMEs, freelancers and institutions/associations, was conducted via existing and newly established platforms, of which there were many. On the other hand, significantly fewer business loans were granted to SMEs and consumer loans to private individuals in the crowd lending sector in 2020.

Payment delays in the business-to-business sector significantly increased, from 8 to 13 days in 2020, illustrating the liquidity problems caused by the pandemic.

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 recently amended the Federal Law on Financial Aid for guarantee organisations: since 1 July 2019, the Law allows for guarantees up to CHF 1 million.

The Swiss Federal council has adopted three measures in particular to support SME’s financing during the pandemic: bridging credits through a guarantee program, credits through a guarantee program specific for start-ups and a hardship support program (mainly non-repayable contributions) for companies which were, due to the nature of their economic activities, particularly affected by the consequences of the COVID-19 crisis.

Table 43.1. Scoreboard for Switzerland

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
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	462 978	487 554
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	606 497	648 133
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	76.33	75.22
Government loan guarantees, SMEs	CHF million	104	148	187	215	210	219	227	238	244	254	255	263	285	315
Interest rate, SMEs	%	..	..	2.21	2.11	2.08	2.01	1.99	2.05	2.07	2.04	2.09	1.96	1.83	1.76
Interest rate, large firms	%	..	..	1.35	1.23	1.16	1.11	1.16	1.16	1.30	1.25	1.30	1.33	1.30	1.29
Interest rate spread	% points	..	..	0.86	0.88	0.92	0.90	0.83	0.89	0.78	0.79	0.79	0.63	0.53	0.47
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	82.92	83.93
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	70.13	71.54
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	772.9	1 670	882.3
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	-35.37	116.07	-47.17
Other indicators
Payment delays, B2B	Number of days	12	13	13	11	10	9	9	7	7	7	7	6	8	13
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	6 241	6 004	4897
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	-6.99	-3.8	-18.44

Source: See Table 43.3.

SMEs in the national economy

SMEs, defined as firms with up to 250 employees, constituted 99.7% of Swiss enterprises in 2018, employing 67.2% of the labour force. Micro enterprises constituted 89.7% of all firms, employing 25.7% of the country’s workforce, while large enterprises only comprised 0.3% of total firms and employed 32.8% of the labour force.

Table 43.2. Distribution of firms in Switzerland, 2018

By firm size

Firm size	Number	%
All firms	592 695	100
SMEs (1-249)	591 016	99.72
Micro (1-9)	531 499	89.67
Small (10-19)	50 311	8.49
Medium (50-249)	9 206	1.55
Large (250+)	1 679	0.28

Note: Data includes commercial companies in the primary, secondary and tertiary sectors.

Source: STATENT 2018, published in August 2020

SME lending

Swiss Economy

According to the estimations of the State Secretariat for Economic Affairs (SECO), the real GDP shrank by 2.6% in 2020, much more severely than at the time of the financial crisis in 2009 (−2.1 %). An even sharper decline was recorded in 1975, in the wake of the oil crisis.

However, the OECD Area registered a decline by -4.7% and the Eurozone by-6.5%. Put into this perspective, it appears that the Swiss economy has weathered the pandemic better than its neighbours and many other countries. Out of the major economies, only China saw growth of 2.3% in 2020.

The service sector was hit particularly hard by the crisis, and private consumption fell to a degree never seen before. Conversely, the contractions of manufacturing and exports were less pronounced than they were during the financial crisis.

The worst affected industries in Switzerland last year were unsurprisingly the hospitality sector (-20.8%) and arts, entertainment and recreation (-7.7%)

Lending Market

Both total outstanding business loans and SME outstanding business loans accelerated their increase in 2020 on a year-to-year basis, reaching 6.9% and 5.3% respectively, compared to their 3.9% and 4.9% growth of 2019.This is partly due to the package of measures approved in Spring 2020 by the Federal Council to mitigate the economic impact of the spread of the coronavirus, which have greatly facilitated companies' access to credit.

With the exception of 2014, SME loans grew each year between 2007 and 2020, achieving a total growth rate of 50.1%. SME loans generally expanded less rapidly than overall business loan growth, which grew by 61.3% during the same period. Consequently, the share of SME loans in total business loans contracted from 80.4% in 2007 to 75.2% in 2020.

Credit conditions

Surveys on bank lending of the Swiss National Bank indicate that household demand for loans increased slightly towards the end of 2020, while firm demand increased markedly with the Covid pandemic. Overall lending conditions have remained broadly unchanged, although banks have tightened credit conditions for customers in particularly affected sectors.

After increasing in 2017, interest rates for loans under CHF 1 million decreased year over year attesting 1.76% in 2020. This represent their minimum since 2009. Interest rate for large firms declined 1 percentage point reaching 1.29%.

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 47 bp in 2020, the lowest spread registered over the reference period 2007-2020.

The Banking Statistics of the Swiss National Bank indicate that in 2020, the utilisation rate of credit lines was 71.5%. The percentage of SME loans requiring collateral rapidly increased in the last 7 years. Rising from 74.9% in 2013 and steadily increasing year on year to reach 83.9% in 2020.

Alternative sources of SME financing

Venture capital

The Swiss venture and growth capital investment market experienced strong growth in the last 5 years. After a moderate increase in 2016 (+14.7%), venture and growth capital investments strongly increased again in 2017 by 164.4%. In 2018, the volume decreased by 35.5% and strongly increased again by 116% in 2019 reaching EUR 1670 million invested in Swiss firms, the highest annual amount in the reference period. In 2020, venture and growth capital registered a contraction of 47.2% decreasing to EUR 882 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 situation explains 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 223.8%.

Later stage venture investments in 2020 remained stable compared to 2019, following a 41.3% increase of the previous year. The total volume of later stage venture capital dropped by 15% over 2007-18. On the other hand, seed investment capital experienced an impressive 384.6% growth in 2020 after a 34% decrease in 2019.

In 2020, start-up investments constituted 39.8% of total venture investment, attesting approximately the same share as of 2007. Start-up investments have decreased 2.9% throughout the reference year and increased 336.4% over 2007-2020.

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 2021, there were 38 platforms operating in Switzerland.

In 2020, 17 359 campaigns raised CHF 606.6 million through crowdfunding in Switzerland. However, 13,092 of these campaigns were handled by temporary platforms in the reward-based crowdfunding / crowddonating segment that emerged during the COVID-19 crisis. Since the first crowdfunding platform's launch in 2008, crowdfunding in Switzerland has been used to raise CHF 2.29 billion in funds. Around 30% of this total was raised in 2020. 2020 still managed to post a small increase of 1.6% compared to 2019 despite the Covid-19 pandemic. Crowd lending accounted for the bulk of funding volumes followed by crowd investing, which together constituted 92% of the Swiss crowdfunding market in 2020.

Loans granted through crowd lending vary greatly depending on the subsegment: Consumer crowdlending serves the consumer loan segment, while business crowd lending provides loans to SMEs, and real estate crowd lending provides mortgage-backed loans. Of the CHF 448.0 million raised, CHF 95.9 million was accounted for by business crowd lending (loans for SMEs): the volume in this subsegment was CHF 159.7 million in 2019.

Rewards-based crowdfunding and crowd donating experienced the highest growth in 2020, increasing by 81.6% to CHF 44.6 million, while funds raised through crowd lending rose by 7.1% to CHF 448 million. Crowd investing decreased by 26% to CHF 114 million. The pandemic triggered a wave of solidarity in 2020, which is reflected in the strong increase in volume and in the number of rewards-based crowdfunding and crowd donating campaigns.

Fintech regulations and Blockchain / DLT

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. The extension of the holding period for settlement accounts from seven to 60 days and an authorisation-exempt innovation area (sandbox) for the acceptance of public funds up to CHF 1 million – came into force on 1 August 2017. 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 sees sustainable finance as a great opportunity for the Swiss financial centre. The combination of sustainable financial services and digital technology (green fintech) is particularly promising. For this reason together with sector representatives, launched the Green Fintech Network on 3 November 2020.

Regulatory simplifications (sandbox) have also been drawn up for the insurance sector (insurtech). For example, in its dispatch of 21 October 2020 on the Insurance Oversight Act (IOA), the Federal Council proposed that small insurance companies with innovative business models could be either wholly or partly exempted from supervision while maintaining the protection of insured persons.

Switzerland is one of the leading locations in the area of distributed ledger technology (DLT) and blockchain. On 1 August 2021, the Federal Act on the Adaptation of Federal Law to Developments in Distributed Electronic Register Technology and the associated blanket ordinance came into force.

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. In 2019, it has been recorded a first increase to 8 days and by the end of 2020 the payment delays was 13 days which is the highest figure since 2007. This suggests that SMEs’ liquidity problems increased due to the pandemic also in Switzerland and not only in most of the European countries, where liquidity problems remain prevalent.

The finding before the pandemic year 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 decreased by 18.4% in 2020 continuing the declining trend started in 2018. The 2020 decline could be partially explained by the several measures taken to counter the economic effects of the pandemic. 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 1st 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 2020, the number of beneficiaries amounted to 1 866 firms for a total guarantee of CHF 316 million. The scheme costs around CHF 205 million in outstanding liabilities for the government and generated CHF 3.7 million in realised losses from defaults in 2020 as well as CHF 1.8 re-additions from previous losses, which corresponds to a 1.2% 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 the period 2018-2020. Over the whole reference period, loan guarantee volumes increased by a factor of 3, 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 22nd 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 effects of this change are already visible in the increase in the volume of the Government loan guarantees, which rose from CHF 285 million at the end of 2019 to CHF 315 million at the end of 2020, an increase of 10.5%.

Specific measures taken to facilitate SME financing during the pandemic crisis

The main support measure of the Federal Government to ensure the liquidity of companies due to the COVID-19 crisis were the bridging credits. Especially small and medium enterprises affected by the COVID-19 crisis have been able to apply for a bridging credit of up to ten percent of their annual turnover and no more than CHF 20 million (19.4 million Euros) at their bank between 26 March and 31 July 2020. The basic credits of up to CHF 500’000 (485’000 Euros) were granted within a quick and very simple procedure. These credits are fully guaranteed by the federal government and have an interest rate of zero percent. Credits that exceed CHF 500’000 are guaranteed 85% by the federal government and 15% by the respective bank and have an interest rate of 0.5%. Overall, approximately 138’000 such credits had been granted with a total volume of about CHF 17 billion (16.5 billion Euros). Therefore, around 20% of all Swiss companies benefited from this program.

Another related support measure due to the COVID-19 crisis were credits for start-ups, which were guaranteed 65% by the federal government and 35% by the regional government. During the application period between 7 Mai and 31 August 2020 359 such credits were granted with a total volume of about CHF 99 million (96 million Euros).

Furthermore in November 2020, the so-called hardship support program was installed to support companies which were, due to the nature of their economic activities, particularly affected by the consequences of the COVID-19 crisis. The regional authorities are responsible for designing and implementing their hardship support programs. Therefore companies, which meet the criteria to be considered a hardship case, can, apply for loans, guarantees, sureties or non-repayable contributions. The respective local authority can accept such applications until 31 March 2022. Up to the end of November 2021, non-repayable contributions of around CHF 4.5 billion (4.4 billion Euros) had been disbursed to about 35’000 companies and guarantees, sureties or loans of around CHF 223 million (216 million Euros) had been granted to about 2’000 companies. Costs and losses of these regional support programs are mainly covered by the Swiss Confederation.

Figure 43.1. Trends in SME and entrepreneurship finance in Switzerland

Source: See Table 43.3.

Statlink

Table 43.3. 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 6.09.2021, “Firmen und Privatkonkurse 2021”, available at: ttps://www.creditreform.ch/news/news/news-details/show/presseletter-05-firmeninsolvenzen-bleiben-auf-tiefem-niveau

Institute of Financial Services Zug (IFZ), "Crowdfunding Monitor Switzerland 2021", available at: https://blog.hslu.ch/retailbanking/crowdfunding/

Invest Europe, “European Private Equity Activity Data 2020”

Intrum, “European Payment Report 2021”, available at: https://www.intrum.ch/de/losungen-fur-unternehmen/studien-events/european-payment-report/european-payment-report/

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

SECO, Press release 26.02.2021, “Gross domestic product in the 4th quarter of 2020: a slowdown in recovery”, available at: https://www.seco.admin.ch/seco/en/home/seco/nsb-news/medienmitteilungen-2021.msg-id-82489.html

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 (2021), “Switzerland’s SME support”. Bern October 2021, available at: https://www.seco.admin.ch/dam/seco/en/dokumente/Publikationen_Dienstleistungen/Publikationen_Formulare/Standortfoerderung/Broschueren/kmu-foerderung-schweiz.pdf.download.pdf/KMU-Fo%CC%88rderung-Schweiz_EN.pdf

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=2018-12&toDate=2020-12&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=2018-12&toDate=2020-12&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

State Secretariat for International Finance SIF, “Digitalisation of the financial sector”. Berne 2021, available at: https://www.sif.admin.ch/sif/en/home/finanzmarktpolitik/digit_finanzsektor.html