What is the Buzz About SME?

P2P versus P2B

When talking about the crowdlending platforms, there are a lot of discussions about social responsibility and what is the destination of the invested money – who will be the end-user and for what purpose will it be spent. Although passive income is clearly a great way to wisely earn for living and a good alternative to the primary income, ethical aspects of it are also often the food for thought of our society.

And here we can find one of the main differences between P2P and P2B platforms. In consumer lending, the end-users of the invested money are mostly people who have borrowed the payday loan for quick and unplanned expenses. Investors are often unaware that the money is probably spent by a person who lives for today and uses the money for anything he desires. Meanwhile, in the case of business lending, invested money goes to different industry businesses, especially - small and medium-sized businesses. While for someone this might sound like just another pitch for the P2B platform that seeks for its competitive advantage, let’s dig deeper and see what SMEs are about, what problems they are facing and why they are so vital for the global economy and not only to the P2B platforms.

The backbone of Europes economy

A small to medium-sized enterprise (SME) is a business with revenues, assets, or numbers of employees that fall below a certain level. While the criteria for determining an SME varies between countries and sometimes between industries, let us take a look at the European Union’s “Evaluation on SME Definition” (2012):

Enterprise category

Staff Headcount

Financial ceilings, EUR (one or another)


Balance Sheet total



≤ 50 million

≤ 43 million



≤ 10 million

≤ 10 million



≤ 2 million

≤ 2 million

SME is considered as the backbone of the EU economy as they create jobs, stimulate local economic growth, and bring valuable benefits to society. According to the European Commission, there are approximately 25 million small and medium-sized enterprises in the EU. SMEs represent over 99% of the businesses in the EU. They employ two out of every three employees, create 85% of all new jobs, and generate around 60% of the EU value-added.

There are a lot of motivated young entrepreneurs who strive to reach the top and wish to turn their ideas into profitable and meaningful businesses. However, those of you who have started your business from scratch, or wanted to take your small business to the next level, have certainly encountered problems attracting funding from banks, which often leads to stifling your ideas and returning to the bottom. The World Bank states that SMEs are less likely to be able to obtain bank loans than large firms; instead, they rely on internal funds, or cash from friends and family, to launch and run their businesses.

Indeed, with almost 25 million small-medium sized companies within the EU, most of them are still underfinanced. The demand for loans is huge and ever-increasing. P2B financing has already been helping to narrow the significant funding gap SMEs are facing by providing them an alternative source of capital to fund business expansion and development. According to the Global Business Data Platform “Statista”, total transaction value in the crowdlending business segment is projected to reach EUR 5,186 million in 2020. And it is expected to show an annual growth rate of 5.3%. However, access to finance is still a key constraint for the growth of SMEs.

Why choose SME?

One might ask why should I be motivated to invest in unfamiliar companies that may be operating in all kinds of different areas? There are many benefits, but let us take a look at three which we would like to emphasize the most:

  1. The potential of high returns - compared to other types of investments, business crowdlending offers a higher yield. Investors naturally seek investments that will give them bang for their buck. This might indicate higher risk, however, the fact that risk exists in any form of investment should not be forgotten as well. For example, “Standard & Poor’s” historical data shows that even for the high-yield bonds in the 32-year period measured the default rate has been 4.22%.
  2. Helping entrepreneurs and supporting the economy - with SMEs contributing significantly to the economy, they need to get the required funding to run their business if they are to grow and expand. Since borrowers have a lack of access to funding from banks, crowdlending investors can fill this liquidity gap while having the opportunity to see the social connection and how the money is spent.
  3. Portfolio diversification - “Don’t put all your eggs in one basket" - portfolio diversification is a widely recommended strategy to maintain a stable portfolio. Business comes from a wide variety of industries - transport, energy, real estate, tourism, entertainment, forestry, education, and many others.


Next time when drinking craft beer and watching your football team’s game at your favorite sports bar, remember that both the pub owners and the brewers are probably a part of the SME community. When using your contactless payment card, keep in mind that there may be several small FinTech entrepreneurs involved in developing this service which from your perspective looks like a simple process. We encourage you to look at things more from producers not the consumers' point of view. To pay attention and be aware that most of the things that we use daily are made by the SMEs. Turning to rhetoric - money that is lent to an SME can at some point make life easier for yourself and provide you with more diversification and vast choices in your daily life.

CEO of the CROWDESTOR Janis Timma says that “one of the founding milestones for our vision is to develop our business even more with SMEs as these are the enterprises that build the foundation of Europe’s economy. And we are not waiting for more favorable times, we are acting now. We are certain that due to the coming regulations, our industry will only become stronger, more transparent and sustainable for the times to come.” Meaningful and sustainable investments which support the real economy to benefit us all.  You must agree that it feels good to know that you are making returns on your investment while helping small businesses grow and knowing exactly where your money goes to.  And these are only a few of the reasons why CROWDESTOR is so passionate about SME as a target market, as it gives profit to investors and at the same time contributes to the larger society.