BRIEF

Alternative financing increases options for the Catalan business community

January 2016.- Catalonia has always been a country driven by SMEs and by entrepreneurs with solid and high growth potential projects. They have traditionally been the engines of our economy and the factors spreading the culture of innovation and internationalization throughout our society. However, SMEs and entrepreneurs have suffered the consequences of the economic situation of recent years more dramatically. Companies relying heavily on traditional banking have had a harder task to overcome restricted credit access situations. Therefore, these alternative financing tools are especially important to Catalonia, as a complement to bank-based financing. 

Over recent years the Government of Catalonia has aimed to give Catalan businesses alternative financing instruments in order to facilitate diversification of funding sources. These suppliers exist so that all kinds of companies can improve their financing mix; from the entrepreneur in the starting stages who may need capital and get it from a business angels network or an equity crowdfunding platform, to a SME that wants to fund its settlement abroad with a participative loan. 

Some of the more positive aspects offered by these mechanisms include obtaining funds easily and quickly, the cost of funding in line with the real cost of money and the risk, and financial independence in order to avoid the possibil¬ity of cross-selling, among other things. And some of these new tools, such as equity crowdfunding and crowdlending or invoice trading - as far as debt is concerned - work online.

Activity in 2015 shows positive results for companies

The first half of 2015 saw the signing of a sponsorship agreement with the three main collective loan or crowdlending platforms in Catalonia: ArboribusLoanbook and eCrowdInvest. In the second half of 2015 the agreement was signed once again and the platforms for invoice trading, Finanzarel and Novicap were also added. Another sponsorship agreement was signed with CrowdcubeThe Crowd Angel and Capital Cell, the three equity crowdfunding platforms in Catalonia.

The crowdlending platform Loanbook has surpassed the 6-million-euro barrier in loans issued (the loan amounts range from 10,000 to 150,000 euros) and Crowdcube, the equity funding platform, has channelled over 2 million euros over the first 10 months of 2015. Arboribus has gone over the 5-million-euro level in loans to SMEs since it began. These new instruments are also attracting the interest of investors. Invoice trading platforms like Novicap have raised capital recently to the tune of 1.7 million dollars, while Loanbook has raised 1.1 million euros. 

Workshops for alternative financing around Catalonia have given visibility and credibility to these instruments. In 2015, 55 workshops they reached out to some 500 business professionals and will continue to do so in 2016.

The system of accreditation guarantees the quality of the alternative financing players. ACCIÓ has accredited the first 17 entities – business angels networks, equity crowdfunding, crowdlending and invoice trading platfoms. This system helps to contribute to the climate of trust and visibility that encourages firms to access these kinds of instruments and also benefits investors, allowing them to invest in the real economy in a more direct fashion.

 

The future of these new financing options

These instruments have come to stay and are evolving dramatically as technology usage also increases rapidly, either in terms of analysing financing requests or when handling payments or the distribution of finance products to the end client.

Financial institutions cooperate with alternative financing instruments, as is the case with the agreement between the UK Santander and collective debt financing platform Funding Circle. This is because alternative financing platforms are in a better position to give, for example, smaller sized loans. They also create venture capital funds to invest in or directly buy companies in this sector, implementing start-up acceleration programmes or establishing subsidiaries to compete in the market.

Catalan companies are progressively more present in foreign markets – there are 8,350 branches of Catalan companies in the world – they are innovating more and frequently more involved in international cooperation and partnership operations. All these strategies are linked to these new financing options.


European Alternative Finance Benchmarking Report, University of Oxford

The alternative financing market in Europe grew 144%, between 2013 and 2014, with a transaction volume of 2,957 million euros

the alternative funding catalogue presents —in a synthetic, easy to grasp and practical way— different fund providers, both equity and debt, to expand the range of possibilities for financing smes and entrepreneurs. 

Some examples of alternative funding

Arpe, a SME specialised in the manufacture and design of personalised textile products,received a one-year loan of 30,000 euros from Arboribus. Mind the Byte, a young and pioneering biocomputing company in SaaS-Cloud technology for computerised drug design, closed a biotech round with a 234,310 euro loan via Crowdcube. Aelix Therapeutics closed a round of 11,5 million euros for an AIDS vaccine. Intercros, specialists in artisanal frozen pastry, has discounted its invoices with Novicap.

Catalonia in Business