The skyrocketing growth of interest rates is making the financing of business in the Czech Republic more expensive. The answer to this is TOKENIZATION
Domestic business felt the noticeable increase in the cost of financing after the Czech National Bank increased interest rates for already the fifth time this year, which are over three percent for the first time in six years. As a consequence of this, the cost of loans for domestic firms increased by 25% in one year. Yet, the vast majority of Czech companies rely on financing from banks.
According to experts, this is an outer limit at which many entrepreneurs consider whether to expand business in the Czech Republic or not, which will likely negatively influence the growth of the Czech economy and thus also investments into the development of automatization and robotization. However, the rate increases will most affect operational financing. Firms have loans tied to floating interest rates that change automatically with the movement of interest rates and with the increasing cost of money, economic growth stops. The growth of interest rates actually combines with the growth of other expenses, which as a result create a so-called recession cocktail. The costs of wages, supplier prices and among other things also energy are also growing for firms at the same time.
While alternative forms of financing on the basis of factoring, leasing and more recently even P2P or crowdfunding are very popular in Western countries, The Czech Republic is among the countries that are relatively sensitive to increase in financing costs because the vast majority of companies apply for loans from domestic banks. According to a study by the Association of Small and Medium-sized Companies, the share is as high as 90%. This is among the reasons why economists are not making optimistic predictions at least for the next year. Many firms are in fact getting into a deficit, which may be even fatal for many of them.
In Western countries financing in the form of leasing, peer to peer, crowdfunding or factoring are very popular. XIXOIO, which is building a social network for business finance, presents a new approach for raising investment capital. This social network functions on the basis of issuing security tokens, which are tied to the actual value of a company. These security tokens can be issued by any company and can be held by any investor, including non-accredited investors. Therefore, anyone can purchase tokens of their favorite company by which they can provide investment capital and contribute to the company’s development. These security tokens can be sold, exchanged, or mortgaged at any time.