Borrow or open up your capital: financing your business

First: what your legal form allows

• Sole proprietorship: you can borrow, but nobody can buy into the capital, since there is none. To take in an investor, you first have to convert the business into a company.
• Sàrl: capital contributions (parts sociales) can be transferred or created, but a new member joining in principle needs the approval of the members' meeting, and their name appears in the commercial register. It is a form designed for a small circle.
• SA: this is the form for fundraising. Shares change hands more easily, shareholders do not appear in the register, and the capital can be increased to bring in investors.

In an Sàrl as in an SA, increasing the capital amends the articles of association (statuts): you go to the notary, then to the commercial register.

Borrowing: the bank, and the guarantee it is missing

A young business rarely has the collateral a bank asks for. That is the role of the guarantee cooperatives (coopératives de cautionnement) backed by the Confederation: they stand surety for your bank loan, up to CHF 1 million, and the Confederation covers up to 65% of their risk.

In French-speaking Switzerland (Fribourg, Geneva, Neuchâtel, Valais, Vaud), this is Cautionnement romand. The application is prepared with your bank, on the basis of a business plan.

Opening up your capital: from your inner circle to funds

The sources of equity, in the order you usually come across them:

• “Love money”: family and friends. Quick, but put it in writing: loan or stake, amount, repayment terms. Misunderstandings cost more than interest.
• Business angels: private individuals who invest their money and their experience. More flexible than a bank or a fund; they invest in a team first.
• Venture capital: professional funds, for businesses with high growth potential. Larger amounts, higher demands: governance, reporting, an exit prospect.
• Crowdfunding: donation, pre-sale, loan or equity, from a wide public via a platform.
• Mezzanine financing: between a loan and equity, for businesses that are already established.

Bringing in an investor means giving up part of the decisions. Before signing, a shareholders' agreement settles what the articles of association do not say: who decides what, who can sell to whom, and what happens if a partner leaves. This is the moment to get a lawyer involved.

Issuance stamp duty: 1% above one million

Capital contributions to an Sàrl or an SA, at formation as well as in a capital increase, are subject to the issuance stamp duty (droit de timbre d'émission) of 1%, but only on the part above CHF 1 million of contributions. A small funding round is therefore not affected; a large one is, and it needs to be planned for.

Innovation support

For an innovative project, Innosuisse, the Swiss innovation agency, funds projects carried out with a research partner and offers coaching to start-ups. Incubators in French-speaking Switzerland also point you to cantonal support.