Let the fintech companies help Företagsakuten reach out with the emergency loans

Debate:

The major banks risk becoming a bottleneck in the National Debt Office's newly opened business rescue fund. To avoid a wave of bankruptcies, Sweden's new generation of fintech companies is ready to channel out necessary loans – with processes and technology to handle high application volumes. This is written by the fintech hub Findec and representatives of just over a dozen fintech companies.

Photograph: Jesper Frisk

The measures now being rolled out by the Government through the National Debt Office's loan guarantees and the support package launched by the Riksbank are important steps in mitigating the economic shock we are now seeing. However, the most important prerequisite for these measures to be effective is that they hit the mark, and that the target group – small and medium-sized enterprises, which represent 73 per cent of all jobs – can save their businesses.

The question we are asking ourselves is – do the traditional major banks have sufficient capability, technical scalability and speed to rescue Sweden's businesses at short notice? The answer is probably no. Even if they have the will, the major banks lack the ability to quickly and securely distribute the loans and guarantees that the government has announced several times over the past few weeks.

Statistics speak for themselves. Since the 2009 financial crisis, the major Swedish banks have seen their market share in corporate lending decrease by approximately ten percentage points up to the present day, while total corporate lending has increased by around fifty percent. The group of companies that has stepped into the banks' place – and developed modern, fully scalable and technology-based business models for lending to small businesses – are fintech companies.

Statens Företagsakut – which is supported by the National Debt Office through seventy per cent loan guarantees totalling one hundred billion kronor – is fundamentally a good medicine for helping small and medium-sized enterprises. A measure that allows private lenders to take greater risk, and concretely support more companies with loans at a limited downside.

Furthermore, the National Debt Office's terms and conditions for the guarantees are sound: lending exclusively to fundamentally viable companies, a maximum total loan term of three years, and a time-limited exemption from principal repayments and interest.

Why not make use of the fintech companies that for years have focused on streamlining the industry? They provide digital lending solutions based on fast and advanced data processing and a transparent assessment of the borrower's creditworthiness that takes place in seconds or hours, rather than weeks or months. As the Corporate Rescue package and the National Debt Office's guarantees are currently designed, this major and strategic resource is entirely left on the bench.

It would be a tragedy if Sweden's well-stocked ”barns” go unutilised in the crisis, as a result of the banking sector and the authorities not being able to cope alone with the ”avalanche-like” increase in applications that, for example, SEB and Danske Bank have recently been able to testify to.

Loans don't solve everything, but for the majority of businesses, financing on fair terms at the right time can be the difference between survival and demise. Therefore, loan guarantees should not apply only to banks and credit market companies, but also to finance companies; a corporate form that most of the fintech companies behind this opinion piece represent.

It would be a tragedy if Sweden's well-stocked ”barns” go unutilised in the crisis, as a result of the banking sector and the authorities not being able to cope alone with the ”avalanche-like” increase in applications that, for example, SEB and Danske Bank have recently been able to testify to.

Loans don't solve everything, but for the majority of businesses, financing on fair terms at the right time can be the difference between survival and demise. Therefore, loan guarantees should not apply only to banks and credit market companies, but also to finance companies; a corporate form that most of the fintech companies behind this opinion piece represent.

Sweden has a unique opportunity to leverage its leading position in tech to set a global example. We are going through a historic crisis, and therefore we must all be able to work together to find innovative and market-neutral solutions that safeguard Sweden's welfare. We therefore wish, in consultation with both the National Debt Office and the major banks, to find the best solution for Swedish entrepreneurs in this matter, for example by including Swedish fintech companies in the National Debt Office's guarantee programme via the banks or independently.

Findec, Sweden’s Hub for Fintech – Anders Norlin, CEO and board member

The article is published in full on Di digital, 2020-04-09:
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About Invoier:

Invoier provides solutions for company financing and has developed Sweden’s only marketplace for invoices. The purpose is to enable market-based pricing for financing and growth of small- and medium sized businesses, as well as a new type of investors get access to this market. The technical base of the offer consists of a unique AI engine that will anticipate both if and when an invoice will be paid. Invoier was founded in 2020 in Stockholm and is financed by the EU and KTH and operates with permission of the Swedish Financial Supervisory Authority and the Swedish Authority for Privacy Protection. Read more about Invoier