Lending Alternatives No Stranger to Britain and the United States, Loan Brokers Catering to Small Businesses Take Hold In Germany

As Germany's largest banks struggle under cost-cutting mandates, flagging income and the legacy debts of the 2008 financial crisis, small businesses in Germany are beginning to turn to a new type of alternative lender, loan brokers, a common source of financing in Britain and the United States.



Uwe Dyballa, the owner of a Berlin company that makes jet sprayers to clean graffiti, said he was repeatedly turned down for loans from his local Sparkasse savings and loan branch. So when he needed €60,000 earlier this year to develop a more powerful spray cleaner, he looked elsewhere.

“Banks are problematic to deal with because it always takes them a very long time until they get back to you,” said Mr. Dyballa, whose business is called Sys-teco. “You have to hand in a lot of documents and the loan I wanted was too small for them to really care about.”

Mr. Dyballa used to get business loans from his Sparkasse, part of Germany’s publicy-owned system of local lenders to individuals and small businesses. But after his Sparkasse failed to act quickly on his latest request, he investigated alternative lenders. It took him three weeks to find ZenCap – a peer-to-peer loan broker based in Berlin for small businesses that opened in April.

Mr. Dyballa said friends steered him to ZenCap. Within a day, after submitting his application and supporting documents online, ZenCap approved his loan, he said.

ZenCap connects investors with small- and medium-sized businesses that need money.

The company is owned by Rocket Internet, a Berlin start-up incubator whose largest/majority shareholder are Oliver, Alexander and Mark Samwer, three brothers from Bavaria who sold Jamba, a seller of cellphone ringtones, to American company VeriSign in 2004 for €203 million.


ZenCap connects investors with small and medium sized businesses that need money to expand or develop. It is one of the most high-profile businesses started by Rocket, which itself has been courting investors before a possible initial public offering of stock, according to people close to the ZenCap. The company itself declined to publicly comment on the IPO speculation.

In just four months since beginning starting, according to ZenCap, 23 firms in Germany have received loans through the brokerage.

Christian Grobe, the ZenCap co-founder, said the company has raised €1 million so far.

“We are looking to raise €10 million within the first year,” Mr. Grobe said.

Demand for alternative finance has increased in Germany and the rest of Europe, some small business owners said, because banks can be reluctant to lend to small- and medium-sized businesses because their loan demands are too small and unprofitable.

But two of Germany’s largest traditional lenders to small businesses, Commerzbank, the nation’s No. 2 lender, and the Raiffeisen and Volksbank chain of retail banks, disputed the assertion that they were not lending to Germany’s vaunted “Mittelstand’’ of small businesses, which generate the bulk of the country’s economic growth.

Another chain of community-owned banks, the Raiffeisen- and Volksbanken group, which has over 16 million members and 30 million customers, said its lending to small businesses rose 4.1 percent to €202.2 billion in 2013, while the overall lending market shrank by 0.5 percent.

“We do not know of that problem,’’ said Gunnar Mayer, a spokesman for Commerzbank, who declined to provide latest figures on Commerzbank’s loan volume it to Mittelstand companies.

Mr. Dyballa, the Berlin entrepreneur, said small businesses such as his, which he founded in 2005, have had difficulty obtaining financing from banks.

“It is difficult to get loans for small businesses,” said Mr. Dyballa, whose business is located in Berlin’s Charlottenburg neighborhood. “If you ask for €50,000 to €100,000, banks don’t see a profit. Only if you ask for more than €1 million, they cooperate more effectively.”

Mr. Dyballa said ZenCap loaned him €60,000 at 7.8 percent interest, which was similar to what he had been paying on his bank loans.

He said he contacted ZenCap online, and uploaded his company’s latest financial figures plus other documentation requested by the loan brokerage. He received approval without ever having to physically meet anyone from ZenCap.


I think around 20 to 30 investors pooled their resources to provide my loan in the end,” Mr. Dyballa said.

ZenCap is Germany’s first alternative lending platform that operates with a loan broker’s ilicense instead of a bank license. Because it only brings together borrowers and investors, ZenCap does not have to maintain capital reserves as traditional banks must do.

Germany’s financial marketauthorities are monitoring ZenCap closely to see whether the brokerage keeps within itsoperating mandate, a spokesman for the financial regulator said.

“As long as those platforms only act as brokers between investors and businesses, they don’t need a banking license,” Sven Gebauer, a spokesmanfor the Federal Financial Supervisory Authority said. “But we will monitor carefully that they actually stay within their limits.”

Loan brokering is more advanced in markets such as Britain, where one company, MarketInvoice, has raised more than €260 million for small businesses in three years.

One MarketInvoice investor is the British government, which has provided more than €6 million to the loan broker, which specializes in factoring, the financing of individual invoices for borrowers.

“We are competing with banks now nearly every day,” Anil Stocker, the MarketInvoice chief executive, said. “We are winning business from the banks.”

MarketInvoice next year wants toexpand to Spain, Germany, Belgium, Luxembourg and the Netherlands, Mr. Stocker said. The German market is underserved, said Justus Lenz, an analyst in Berlin at Die Familienunternehmer, a group that represents 180,000 family-owned businesses.

Having more options for loans will help Germany’s small businesses, he said.

"It will make us less dependent on just one lending partner like the banks,” Mr. Lenz said.

But whether Germany’s family businesses, which tend to have low or no debt and favor conservative investments, turn to alternative brokers such as ZenCap remains unclear. None of Mr. Lenz’ small business members have approached ZenCap yet, he said.

“Companies are skeptical of course, and they have enough capital at the moment,” he said. “If a company needs money, another popular option is to lend from other companies rather than going to banks or alternative lenders.”

ZenCap may also have a hard time starting up in Germany, where loan rates in the euro zone are already low and demand for borrowing has been restrained.

“It is possible that regulations are going to make bank loans too complicated,’’ which may allow shadow lenders to thrive, said Christian Schulz, an analyst at Berenberg Bank in London