In April 2015, I attended a conference in New York of the former Secretary of the Treasury of the United States, Lawrence H. Summers, in which he energetically stressed that a financial system that is not very diversified is a weak system . What is the situation in our country regarding alternative financing? In this post we give you our point of view on the situation of these interesting financing alternatives that we have today at our disposal.
Alternative financing in Spain
Spain has made positive progress in creating alternative financing tools for a larger company, but nevertheless, financial alternatives for SMEs are more forgotten. Knowing that these are the engine of job creation, they can not access financial markets to obtain loans through alternative financing to banks, given their small size. As a result, Spanish SMEs continue to rely exclusively on bank financing, a situation that is not advisable for this company. The non-financing alternative makes Spain a weak and dependent economy. In addition, the crisis stopped the bank financing in drowning drowning our SMEs and we must not allow this to happen again.
Just as Spain is trying to stop relying on “brick”, it must also promote alternative financing mechanisms for companies so as not to depend exclusively on bank financing and thus create the basis for a more stable economy that protects the future of our SMEs.
What can Spain do to promote alternative financing?
Other developed countries, such as the United Kingdom, have reacted strongly to this serious problem by encouraging alternative financing to their SMEs in a strong manner. Here are some of the measures implemented successfully in neighboring countries in relation to alternative financing.
Derivation by law of applications rejected by banks to platforms that offer alternative financing for SMEs
The British government has approved a regulation called “mandatory bank referral scheme” by virtue of which banks are obliged by law to refer to alternative financing platforms those funding applications that have been rejected by them. Even in countries where such a measure is not mandatory, such as Germany or the United States, banks are reaching agreements with platforms that offer alternative financing loans to refer them to operations and even to invest through them.
Spain should assess the implementation of this measure, monitor compliance and encourage collaboration between banks and platforms that offer financing alternatives for companies.
Co-investment with alternative financing platforms
Through British Business Bank, the British government co-invests in loans to SMEs generated by alternative financing platforms under the same conditions and together with private investors. Instead of creating public bodies to grant loans or credit programs that depend on the banking channel, the British government has realized that it is more effective to do it directly through private alternative financing platforms.
Spain should take this measure into account and invest in the same conditions as the private sector.
Taxation in alternative financing
As of April 2016, British investors will benefit from tax deductions in their IRPF when investing in P2P loans through the so-called “Lending ISA”. In fiscal matters, Spain should consider:
- Apply tax deductions to the investment in loans to SMEs through alternative financing as well as those already existing for investments in capital of “start ups”.
- Eliminate the obligation to apply withholdings (currently when the bank lends to a company there is no withholding, however, when the individual lends, there is retention).
- As well as the creation of a beneficial fiscal framework to facilitate the creation of fiscally efficient domiciled debt vehicles in Spain and prevent debt vehicles from “traveling” to Luxembourg.
Regulations that regulate the alternative financing sector for companies
Spain has succeeded in regulating the crowdfunding sector through the Business Financing Law but it has limited itself to protecting the investor and, unlike the British example, Spanish law has not been accompanied by measures such as those listed above that encourage the growth of this new source of alternative financing. Quite the contrary, our regulation imposes obstacles that do not exist in other countries, such as prohibiting automatic investment mechanisms, imposing limits on investment, prohibiting blind profiles of borrowers, limitations on investment by the platforms themselves or imposing identification mechanisms very burdensome investors (eg electronic signature). The regulations in Spain should evolve to match those of the more developed countries in the sector such as the United Kingdom and, above all, incorporate measures that support the development of the sector, otherwise our companies will have a competitive disadvantage.
Other developed countries have learned from their mistakes and are strongly promoting the development of alternative sources of funding, now it’s up to Spain to move the file.