For some years now, credit platforms have developed in the area of lending to private customers (B2C) and to corporate customers (B2B). As part of a credit platform, a borrower is brokered online to a lender or vice versa. In Austria too, most banks have a so-called “online lending” and the topic “crowdfunding or crowdlending” is (still) on everyone’s lips. Have you ever completed a personal loan through an online tool in your privacy? Then you have experience in this regard.
In the area of municipal financing, there is still some restraint, at least in Austria. The loan platform is far from standard. This market can be very interesting for banks and therefore also for municipalities. A bank can represent credit growth without excessive risk-building. In addition, municipal financing is currently still free from capital backing by the bank. That’s why cities and towns can be a welcome partner for banks. All of this, however, also leads to high competition in the terms and conditions, which is exacerbated by the banks’ individual liquidity and refinancing situation.
Are loan platforms the solution?
In Germany, a few loan platforms have now developed in the area of municipal financing, which are also reaching out to Austria. Do such platforms bring benefits to communities and community institutions? Are there differences in regional markets?
The main issue in any loan application is a high degree of standardization, which will be necessary not least because of the high level of competition. Immediately thereafter comes the transparency and a possible extension of the basis of lenders from the banking market to the capital market and thus to insurance companies, pension funds, foundations and other investors. However, as we have seen in recent years, this broadening, which we have been talking about for years, need not necessarily lead to a more efficient offer for municipalities and municipal borrowers. This will require more than just the provision of credit platforms.
What is really important?
From our point of view, it is crucial for the municipalities that the process of borrowing is accompanied and thus a “tailor-made standardization” takes place. Especially in Austria there are extensive differences in the municipal financing market compared to Germany and Switzerland. In addition to a much smaller volume of municipal financing, the vast majority of municipal loans in Austria are subject to variable interest rate fixation (usually still tied to EURIBOR). In return, the situation is reversed in Germany and Switzerland. This means that most of the financing there has a fixed interest rate fixation. Also topics like
• tender document
• temporal validity of the offers
• individual processes regarding permits
• different utilization times
• grace periods, e.g. for the construction phase
• especially long terms as well
• customized conditioning
play an essential role.
Have you already thought about an accompaniment?
The greater the uncertainties for the lender when bidding, the higher the markup and thus the condition. Efficient solutions can also be switched off. For this reason, every lending, regardless of whether “online or offline” requires careful preparation and exact settlement.
As a service provider for municipalities, which is constantly launching tenders, we will monitor the market for municipal loan tenders very intensively and will keep you informed about this from now on.
If you are planning an investment project and / or a loan invitation, please contact us at firstname.lastname@example.org and get your free initial consultation.