SwissLending, a new player within the FinTech ecosystem and the first crowdfunding platform in Switzerland specializing in loans for real estate professionals, is officially launched this week in Geneva.
Activity began in early 2016 to test the procedures implemented by the company. Two transactions were completed successfully in Lancy, Switzerland and Villiers-sur-Marne, France, for a total amount of funds raised over CHF 1.1 million.
Globally, the crowdfunding industry had grown to approximately $34.4 Billion (yes, with a “B”) by the end of 2015, according to the study published by Massolution. Looking at those numbers by market segment, two stand out in terms of volume: lending to businesses and individuals, and real estate crowdfunding. The latter, growing rapidly, is valued at $ 2.57 billion in 2015, but this sector is still in its infancy in Switzerland. As exposure and education increases, so will the size of the market.
In practice, the level of equity is the Achilles heel of a promoter seeking growth. Promoters currently face two major and recurring problems: longer product cycles (almost systematic recourses on building permits) and increasing capital requirements asked by their banking partners. These two phenomena cause the slowdown of development of new real estate operations. Crowdlending is the opportunity to address this downturn by offering developers additional funding in complement to that of the banks.
In the property sector, the crowdlending revolution is even more active as real estate investing has always been reserved to institutional investors and UHNWI. The need to democratize the offering, generally considered rewarding (yield from 6% to 12%) and with controlled risk, is the purpose of SwissLending. It will place the investor at the heart of projects’ financing of public utility - the construction of housing, offices - with high added value. The funding lasts only a few months and is reimbursed at the completion of the construction and sale of the lots.
In summary, the historical funding model of real estate transactions is not as dynamic as it once was. Banks are more cautious and the cycles of real estate transactions are longer. Real estate crowdlending is an innovative financing alternative, and an interesting source of profitability for developers and investors.