The Schuldschein has established itself as an alternative to credit facilities and bonds: Why SMEs in particular are increasingly using the Schuldschein as a finance option.
Poltergeist, Kindergarten, Wanderlust and now a new addition: Schuldschein is the next new German word that is spreading rapidly throughout the English-speaking world. The Schuldschein (promissory note) has established itself on an international scale as an alternative not only to bonds , but to bank loans as well.
Technically speaking, the Schuldschein is a simple loan. And it is precisely the "simple" characteristic of the Schuldschein that makes it attractive to a number of companies, particularly SMEs:
- The minimum amount for a Schuldschein is roughly EUR 20 million, whereas for most bonds it is only worth starting at a volume of EUR 500 million.
- The amount of red tape involved is much less than for bonds.
- An external rating is not necessary.
- Business data is disclosed only to investors that express an interest.
- The number of investors can be set at a low or high level – LBBW can target over 700 investors if required.
- LBBW targets investors with a long-term investment interest.
- The Schuldschein give SMEs the option of accessing LBBW finance without going direct to the capital market.
- The interest rates for borrowers are comparatively low, yet still attractive to investors.
- Borrowers can split the term of the loan into tranches and don't have to repay the debt in one fell swoop.