Krea reaches a new record-low interest rate level despite rising rates in the capital markets

The interest rates in the capital markets have risen in recent times, which was reinforced on April 28 by the Riksbank's decision to raise the policy rate. However, a new analysis of 30 000 loan offers on Krea's platform shows that the interest rates chosen by customers have never been lower than during the first months of 2022. The positive effect of increased transparency in loan terms within the small-business financing market outweighs the short-term negative impact of higher policy rates. The interest rates on Krea's platform are also supported by a short-term effect of lower funding costs for lenders with banking licenses, as deposit account rates have been reduced following consumers reallocating investments into cash savings accounts.

In April, the Riksbank decided to raise its policy rate by 25 basis points. Over time, this will lead to higher funding costs for banks. In the short term, however, there is no visible impact on the small-business financing market in Sweden. An analysis of 30 000 loan offers on Krea's platform shows that the interest rates chosen by customers have never been lower than during the first months of 2022. The average interest rate at which a company finance its operations through Krea has decreased by 60% since August 2019.

Average selected interest rate

Indexed to 100% in Q3 2019

The interest rates selected by customers on Krea's platform have improved over an extended period. Increased transparency in loan terms has enabled small businesses to choose increasingly attractive loan offers.

”We have seen a gradual yet clear trend toward better loan terms for small businesses in Sweden. This is driven partly by small and medium-sized enterprises becoming more selective about which loan offers they accept, and partly by improvements in the underlying financing market. Several lenders connected to Krea's marketplace have obtained banking licenses, reducing their funding costs. In addition, increased transparency around loan terms, through marketplaces such as Krea, helps support this positive development”, says Carsten Leth, Chief Commercial Officer at Krea.

An increasing number of lenders

In addition to greater transparency, there is also a growing number of lenders active on Krea. Lenders to small and medium-sized enterprises that rely on deposits have also seen a short-term effect of lower funding costs. As consumers have reallocated investments from equities to cash saving accounts, lenders have experienced higher capital inflows, enabling them to lower interest rates on their savings accounts. However, this effect is likely to be temporary, and prices will eventually rise. This, in turn, will lead to higher funding costs for lenders, resulting in increased borrowing costs for small businesses.

There appears to be a strong opportunity for small and medium-sized enterprises to secure financing at a fixed rate interest for up to five years.