Crowdfunding has added value for clients and the bank

Crowdfunding is insignificant in terms of euros compared to the billions in business financing that Rabobank provides every year in the Netherlands. 'Start-ups that utilise crowdfunding do have an advantage when applying for financing at Rabobank', says Paul Dirken, Director of Business Banking at Rabobank in the Netherlands.

More and more Dutch entrepreneurs ask the bank about the possibilities of crowdfunding. With crowdfunding an entrepreneur raises capital from a larger group of people, who each invest a relatively small amount. The bank will be the main sponsor of the first Dutch National Crowdfuning Day in Amsterdam on 12 May 2015.

Confidence in an entrepreneur’s plans

Dirken says an entrepreneur’s ability to raise crowdfunding says a lot. 'Having reliable information about the client and the plans for which he or she needs financing plays a key role in the bank's assessment. Providing this information isn't a problem for someone who has had a successful business for years and now wants to take a new step. In case of start-up entrepreneurs it is, however, more difficult to estimate the market potential. A combination of the number of social media likes, pre sales and crowdfunding nevertheless provides information and can contribute to the risk assessment. Crowdfunding provides entrepreneurs with both part of the required capital and demonstrates involvement and confidence in the related plans.'

'Crowdfunding provides entrepreneurs with both part of the required capital and demonstrates involvement and confidence in the related plans.'

Paul Dirken, Director of Business Banking at Rabobank in the Netherlands.

A conversation changer

The fact that crowdfunding amounts to more than only monetary financing is precisely why Rabobank considers it a plus-point when entrepreneurs tap into this opportunity. 'While the bank still has to make the risk assessment, it really changes the conversation between the client and the bank. This is how crowdfunding helps make primarily young and ambitious businesses that have a strong connection with their local community financeable for the bank', says Dirken.

Modest in size

Crowdfunding is still modest in size in terms of euros compared to bank financing. In 2014, a total of 51 million euros in business financing was raised via crowdfunding in the Netherlands. This is a tiny amount compared to the more than 12 billion euros in new loans, of which more than one billion under 100,000 euros, that Rabobank alone provided in 2014.

Popular mainly among younger generations

Crowdfunding is growing however. The total amount of crowdfunding raised last year in the Netherlands was already twice as much as in 2013. A survey among start-up entrepreneurs commissioned by Rabobank reveals that new forms of financing, such as crowdfunding, are  on the radar of mainly new generations of start-ups. Approximately 100,000 new businesses are started in the Netherlands each year, with most of them being sole proprietorships or small businesses.

Broadening the focus beyond only bank financing

The growth in crowdfunding reflects the development of entrepreneurs needing more risk-bearing capital and not being able to rely exclusively on bank financing for loan capital. Dirken: 'The crisis has driven many existing businesses into the red, which has harmed their financial buffers. Having a business has also become more risky in the face of more far-reaching and faster changes. It is more important than ever for existing and start-up businesses to have strong financial buffers in order to be able to absorb setbacks and seize new opportunities. These buffers could be in the form of equity or equity from family or investors. Crowdfunding can be used to fulfil part of the need for equity and supplementary financing. Rabobank continues to be the Netherlands’ leading financier for SMEs – also in this new era. At the same time we also increasingly act as an intermediary in the field of equity and financing.'

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