With SMEs increasingly facing hurdles to secure loans to expand their businesses, they are at an impasse. Rules and regulations are increasingly in favor of larger corporations, which can leverage their expansive tools (stocks, bonds, etc.) to debt finance their operations, without ever needing to spend their own money.

SMEs (Small and Medium Enterprises) lack the financial means to raise funds, something that can quickly lead to a corporate death of the firm. According to a report by the European Investment Fund, nearly a quarter of SMEs surveyed answered they had extreme difficulties accessing external financing. Apart from factors such as lack of public support, a major driver was banking rules, which were tightened during the first three quarters of the same year.

On the other hand, the global corporate lending market is expected to swell from its rough current $3 billion to almost $11 billion by the end of the decade. This is a CAGR (Compound Annual Growth Rate) of a stunning 24.5%.

A Severe Market Gap

The latter report shows that the market for corporate lending is on the rise. The report covers all major markets, including Asia, the Americas, and Europe overseeing segments that include large enterprises and SMEs.

But when the EIF report is taken into account, a completely different picture is painted. While the latter shows an increase in the lending market, it does little to address the issues SMEs today face, highlighted by the former.

While there can be an endless debate on the hurdles faced by SMEs (laws and regulations favoring larger corporations) and justifications by the financing institutions (they take on greater risk with SME lending), the fact of the matter is that the tussle is detrimental for smaller firms.

Is the Tokenization of RWAs The Answer?

Blockchain has at times been declared the holy grail, offering lower entry barriers, financial freedom, and data security like none other. However, one underrated use of the technology is creating a lending market for SMEs through tokenization.

What does this entail? An SME can create digital tokens that represent some real-world asset (RWA), allowing them to monetize these for loans. Easy to access, fractionalized, and immutable, RWAs can be anything ranging from real estate to stocks, and even IOUs.

But that is only one side of the proverbial coin. For SMEs, they need access to lenders, individuals, and firms who are willing to acquire these RWAs as loans, lending out their cryptos to SMEs. The organizations can then circumvent the overbearing and unnecessary rules of financial institutions and the lenders can enjoy safe profits on their lent crypto.

Finding the Right Marketplace

While SMEs are on the hunt for lenders and people are willing to loan out their digital coins, they must always head to a marketplace or a platform. These marketplaces should have checked some boxes before parties can meet and interact.

This includes things such as regulatory compliance, ease of access and price discovery, the right risk assessment, transparency, and the right products.

For many EU-based SMEs and investors, platforms like Credefi seem to be the perfect answer. Using RWAs, the credit service merges traditional finance with blockchain technology. Its intuitive UI and UX allow users to instantly access RWAs that suit their investment profile and use their cryptocurrencies as loans.

With blockchain as the backbone, all loans and RWAs are transparent, enabling easy collateralization, reduction of barriers, and increasing speed and efficiency of securing loans for SMEs. One such particular product, the NFT corporate bond, reflects the ideology of instant availability, ease of access, and collateralization.

Backed with its own utility token, Credefi offers users several benefits, including profit sharing, and even having a voice through voting, a testament to a consumer-centric approach.

With almost 24.4 million SMEs spread across the EU, Credefi can play a crucial role in financing.