The new approach to Dutch SME financing in practice

Entrepreneurs in the Dutch SME sector and Rabobank are increasingly joining forces to find new and effective approaches to capital and financing. There is a great need for capital that is now being met through a range of possibilities on offer to small and medium sized enterprises.

‘It is more important than ever for entrepreneurs in small and medium sized enterprises to have sufficient buffer capital. This is necessary in order to be able to absorb setbacks and to take new steps. Loan capital can help as a supplementary source’, says Eric Saris, Director of Business Banking at Rabobank in the Netherlands.
While many people traditionally equate equity with buffer capital, there are also other sources including investors and venture capital companies. There are also other options for loan capital besides bank financing. Eric Saris: ‘As a cooperative bank, we continue to be an important financier for the SME sector, but we also increasingly serve as an intermediary that brings together clients and other parties, such as leasing and crowd funding providers. And we are actively utilising various governmental agencies’ stimulus schemes for our clients. I notice that we are now taking a broader look at the range of options than we did a year ago. In my view this is a very positive development because it means we are providing our clients with more optimum support.’

What have been the concrete results so far?

  • Rabobank has provided 225 million euros in risk-bearing subordinated loans to SMEs. Another 50 million euros will be added to this amount in 2015.
  • Rabobank has had 300 million euros from the European Investment Bank available for small and medium sized enterprises since November 2014. Rabobank has now provided 120 million euros of this amount in loans.
  • Rabobank has utilised 62.5% of the Dutch government’s guarantees for SME loans (BMKB) in 2014 for SME loans that are slightly too risky for banks.

But many people still think it is more difficult for businesses to obtain credit now than it was in the past.

Saris: ‘The ease with which credit was available until 2008 is a thing of the past. The world has genuinely changed both for businesses and banks. But as Rabobank we still provide billions of euros in business loans every year in the Netherlands, and that expressly includes SMEs. This makes us the Netherlands’ largest lender to small and medium sized enterprises.’

What has changed in recent years?

‘Banks are increasingly faced with more stringent requirements from regulators with respect to their buffers and risk profile. Banks must take a much stricter approach to their lending in order to be able to meet these requirements. The financial crisis has driven many companies into the red and their buffer capital has been affected as a result. Enterprise has in the meantime become more risky, with more far-reaching and faster changes. This has made having sufficient buffer capital more important than ever. Buffer capital can be equity or investor capital. New possibilities are arising. This also applies to loans and other forms of loan capital.’

‘Our employees are joining forces with entrepreneurs to see how they overcome any obstacles so that they can still close the deal.’

Eric Saris, Director of Business Banking at Rabobank in the Netherlands

What results is Rabobank achieving with the new possibilities for supporting lending to small and medium sized enterprises?

‘I think the European Investment Bank’s well-functioning programme for stimulating lending in Europe is an excellent example. Within the current EIB tranche, the local Rabobanks have made 300 million euros available to small and medium sized enterprises with a maximum interest discount of 0.65%. We have already lent out 120 million euros of this amount in the first two and a half months and are now entering into talks with the EIB regarding a new tranche.
We are also actively utilising BMKB, which is the Dutch government’s guarantee scheme for loans to small and medium sized enterprises that just fall short of having required amount of collateral. Rabobank accounted for 62.5% of the provided guarantee budget in 2014. This shows to me that our employees are joining forces with entrepreneurs to see how they overcome any obstacles so that they can still close the deal.’

Can Rabobank also help ensure that businesses have enough buffer capital?

‘Our role is by definition limited in this area: an entrepreneur must either contribute equity or arrange it through other investors.
A great deal of risk-bearing capital is required. Institutional investors, such as insurers and pension funds, could step in to help meet this need. And we can contribute our expertise in the field of risk assessment.
But we also do our part financially as well. We do this by providing subordinated loans via Rabobank Stimulus Capital. Through this programme we have 225 million euros in outstanding risk-bearing capital in small and medium sized enterprises and have the scope to increase this amount by 50 million euros this year.’

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