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.