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Old 27.05.2012, 13:21
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Maximum debt ratio allowed in CH?

I am planning to talk with my bank this week about a getting a business loan. I was told by a colleague that I need to be aware that CH has a formula for "over indebtedness" and that I should not tell the bank how much debt I already have (for example, with foreign credit cards).

Does anyone know of such a formula or how the magic limits might be determined?

My own situation is approximately: income of CHF 80K with debt of CHF 15K + $25K. I'm hoping to refinance that debt all in CHF at a better interest rate.

I already looked at private lenders (Migrobank, etc.) but they all refuse to consider me since I'm an Einzelfirma.
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Old 27.05.2012, 14:01
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Re: Maximum debt ratio allowed in CH?

I think, banks follow a basic principle when giving out loans to small businesses:
"Unless you have assets that match or exceed the loan you request, you don't get any money at all."

That's why people in the bar/restaurant business usually finance through a brewery.
(There are some threads about that)

What kind of business is that anyway, if one may ask?

In Germany, like in the US, there are a couple of crowd-funding sites (http://www.smava.de etc.) where people can basically bet 100+ Euros that you can pay back the money.
Haven't heard about one in Switzerland - and as the financing itself still goes through a German bank in the end, I don't think you need to apply from Switzerland...

Addendum: people then proceed to cash-in their 2nd-pillar pension fund and more often than not, completely ruin themselves in the process. If you do cash-in the 2nd-pillar, you should just ask yourself one question: "If this thing f-*c-ks-up, am I prepared to live a _very_ frugal lifestyle for a very long time?"

Edit: ah, now I see what you are doing..

Last edited by rainer_d; 27.05.2012 at 14:10. Reason: basic reading skills are advantageous
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Old 27.05.2012, 15:00
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Re: Maximum debt ratio allowed in CH?

I provide on-site technical support for Apple products.

I have probably CHF 10K of fixed assets (including inventory) + whatever is in my bank account at the moment ;-)

I was kinda hoping they would look at my cashflow and income (I do all of my business banking through them) and so consider me a reasonable risk.
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Old 27.05.2012, 15:38
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Re: Maximum debt ratio allowed in CH?

what rate are you currently getting? i'd be surprised of someone was willing to lend to you unsecured for less than 6%.
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Old 27.05.2012, 16:21
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Re: Maximum debt ratio allowed in CH?

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...I should not tell the bank how much debt I already have (for example, with foreign credit cards)....
... debt of CHF 15K + $25K. I'm hoping to refinance that debt...
Are you clear in your mind what you are trying to achieve - do you want to take on more debt and mislead the bank about your existing level of debt, or do you genuinely wish to refinance (exchange one debt for another)...you seem to be unsure
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Old 27.05.2012, 16:29
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Re: Maximum debt ratio allowed in CH?

I'm afraid the Swiss banks have learnt from the disastrous debt situation in the UK and US - and are determined not to follow suit. Unless you have a brilliantly well presented case for getting a loan- it just won't happen - I am sorry to say.
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Old 27.05.2012, 17:10
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Re: Maximum debt ratio allowed in CH?

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Are you clear in your mind what you are trying to achieve - do you want to take on more debt and mislead the bank about your existing level of debt, or do you genuinely wish to refinance (exchange one debt for another)...you seem to be unsure
?

I'm not unsure. I do want to refinance the debt.

What I want to avoid is them saying "you have too much debt already so we won't even talk to you".

My interest rate for my debt is currently at 10%.

Last edited by axxxxe; 27.05.2012 at 19:28.
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Old 27.05.2012, 18:08
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Re: Maximum debt ratio allowed in CH?

it looks like you've already got a lot of debt. i think it would be hard to get a loan. after all, how much can you make in repayments each month?
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Old 27.05.2012, 18:25
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Re: Maximum debt ratio allowed in CH?

If you have a steady, documented income, you may be able to obtain a personal loan from a bank. I know people who've done it in Switzerland. But if you're an einzelfirma without a predictable income, and if you don't have collateral assets, it could be difficult.
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Old 27.05.2012, 19:24
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Re: Maximum debt ratio allowed in CH?

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it looks like you've already got a lot of debt. i think it would be hard to get a loan. after all, how much can you make in repayments each month?
I would be looking for something in the range of CHF 1000-1500 per month.
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Old 27.05.2012, 19:27
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Re: Maximum debt ratio allowed in CH?

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If you have a steady, documented income, you may be able to obtain a personal loan from a bank. I know people who've done it in Switzerland. But if you're an einzelfirma without a predictable income, and if you don't have collateral assets, it could be difficult.
Yes, when I first approached Migrobank and told them my income and desire for credit, they were completely receptive right up until I said Einzelfirma

My hope is that my own bank (which sees my income over the past years) will be more open to the idea.
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Old 27.05.2012, 21:10
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Re: Maximum debt ratio allowed in CH?

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?
I'm not unsure. I do want to refinance the debt.
If you are seeking a business loan then it has to be about the business, not paying down personal debt! If you approach a bank about a business loan, then they are going to expect to hear of a business plan on how you are going to spent the money and furthermore they will expect to see it reflected in the accounts. So for example if you say you are buying 4 new machines for training classes, then they are going to expect to see the payment go through you account and your accounts for the period to reflect this....

You will loose whatever credibility you many have with the bank if you start asking for a business loan that then turns into a request for a personal loan to refinance debt.
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Old 27.05.2012, 21:25
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Re: Maximum debt ratio allowed in CH?

I think you will struggle to get a loan to support such a business as I'm guessing that you don't need stock or equipment. Something for transport possibly, but if the business loan is just to pay the salary I wouldn't hold out for much hope.

If you need stock, premises then that would be different, but also not easy to obtain.
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Old 27.05.2012, 21:33
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Re: Maximum debt ratio allowed in CH?

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I would be looking for something in the range of CHF 1000-1500 per month.
if you want to borrow 40k over 2 years, then the capital repayments alone is going to be 1667chfs a month.

maybe you can start paying down existing debt and trying to re-finance what you can to reduce the interest cost. given your personal financial circumstances, 10% isn't an unreasonable amount of interest to be paying. that said, there's so much credit sloshing around, you might be lucky, but with an einzelfirma, lenders are going to be nervous about how regular your income is or how safe your business is.
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Old 27.05.2012, 21:59
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Re: Maximum debt ratio allowed in CH?

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I am planning to talk with my bank this week about a getting a business loan. I was told by a colleague that I need to be aware that CH has a formula for "over indebtedness" and that I should not tell the bank how much debt I already have (for example, with foreign credit cards).
axxxxe,

I noticed on your profile that you're a student. As such I don't think the lack of capital necessarily reflects a bad credit history, but rather a common situation amongst young people starting their careers these days.

You may want to try an alternative finance model, such as Smava.

This is a website offering peer-to-peer credit.

Basically, you post your requirement, give details of your creditworthiness and peer groups collectively fund your project.

You pay a rate of interest based on the risk you post. Higher risk, higher rate of interest. Lower risk, lower rate of interest.

There are a number of such Internet sites, each offering similar features. I'm not aware of one in Switzerland though.

https://www.smava.de/

I have no experience with the company myself. I read a few articles about them years ago and was impressed with the novelty of the idea at that time.

Alternatively, why not try working for one of the big I.T. monkey factories (Bank etc.) around Zürich until you've got a little more change in your pocket and use the opportunity to gather lots of useful business contacts.

Cheers
Harry
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Old 27.05.2012, 23:34
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Re: Maximum debt ratio allowed in CH?

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If you are seeking a business loan then it has to be about the business, not paying down personal debt!
The debt is all business debt. It all appears in my accounting as business debt.
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Old 27.05.2012, 23:35
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Re: Maximum debt ratio allowed in CH?

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if you want to borrow 40k over 2 years, then the capital repayments alone is going to be 1667chfs a month.
Yes, I was thinking along the lines of 3-4 years.
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Old 27.05.2012, 23:45
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Re: Maximum debt ratio allowed in CH?

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axxxxe,

I noticed on your profile that you're a student. As such I don't think the lack of capital necessarily reflects a bad credit history, but rather a common situation amongst young people starting their careers these days.

...

Alternatively, why not try working for one of the big I.T. monkey factories (Bank etc.) around Zürich until you've got a little more change in your pocket and use the opportunity to gather lots of useful business contacts.
My bad, the profile was (way) out of date. I finished my studies in 2009! (Uh, and I'm on my 3rd "career" - I'm 40 years old)

Regarding working for an IT firm: I have a successful business of my own. All I am trying to do is refinance the debt I incurred starting the business.
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