In this exclusive interview, we delve into the challenges faced by small and medium-sized enterprises (SMEs) in the Netherlands when seeking financial support.

Bas Vanhorick, the Country Manager for smeGo in the Netherlands, brings a wealth of insight with over 20 years of experience in the financial industry. Bas sheds light on the hurdles SMEs encounter when seeking financing, the impact of regulatory complexities, and the evolving landscape of financing. Furthermore, he provides a unique perspective on how smeGo distinguishes itself with a comprehensive approach, bridging the gap between traditional banking models and the ever-changing needs of SMEs in the Dutch market.

Question: Thanks for taking the time for this talk, Bas. Let’s get right to it. In your experience, how easy or challenging is it for SMEs in the Netherlands to secure funding or credit, especially from traditional sources?

Answer: Securing funding can be a real challenge for SMEs, especially considering that this is not something entrepreneurs do every day. Banks, the traditional go-to partner for financing, are standardising their loan acceptance criteria for SMEs more and more every day, and more and more small businesses do not fit into these criteria. Alternative finance (AltFin) can provide a solution, but the multitude of players proves to be an obstacle. Many AltFin companies are ‘one trick ponies’ offering only one solution, regardless of the problem. They specialize in only one area like leasing, factoring, small loans, large loans, credit lines, cash advances, etc. For an entrepreneur, it’s challenging to find the right partner for business and one that can accompany them along the journey of development, growth, and change.

The broad scope and product range of smeGo offer a one-stop-shop solution for businesses. We provide loans, credit lines, and factoring in all sorts, sizes, and forms. Flexibility is a key value of smeGo.

Q: Are there specific sectors or types of SMEs that face more difficulty in accessing financial support?

A: Sectors and companies with few assets on their balance sheet or where a financing need is more in intangible assets than traditional fixed assets often face more difficulty with financing. This is often the case with innovative or digital companies or companies in the phase of digitization of part of their business. It also pertains to software companies, service companies, and other asset-light companies.

To help them, we can still provide financing with the help of the European Union. In cooperation with the European Investment Fund (EIF), we can provide loans even to these companies when they lack collateral.

Q: So what are the common obstacles that SMEs encounter when seeking financial assistance in the Netherlands?

A: When you look at banks, for instance, they often have a very rigid set of criteria that you have to meet, even if you’re a financially sound company. You’ll find that, for some reason or another, you don’t fit into one of these predefined boxes. Then, more and more, you see that banks, but also other AltFin companies, have a green, orange, and red system, and if you’re flagged as red, then it’s ‘goodbye’. In many cases, if you just apply some common sense and solid financial knowledge, these companies are easily financeable and it’s a perfectly good risk to fund the company. That type of flexibility is often lacking in the traditional sector.

And of course, if you look at banks specifically, then the number of documents that they ask for and the length of the procedure can be so long that you have to spend half a year arranging financing, which is understandably too much for many companies, especially SMEs who don’t do this every day. For them, it becomes almost a full-time job to request financing with banks.

Q: Are regulatory or bureaucratic hurdles hindering the growth of SMEs in the Netherlands?

A: I would say yes because regulators, on the one hand, help create a solid financial landscape. On the other hand, they do it in a rule-based way. So they impose a lot of rules and regulations upon banks, which they then have to translate to SMEs. I mean, the banks can’t help it; that’s just the way it is. So they’re forced to standardize and apply all these rules in the strictest possible way, or risk getting huge fines. If you look at it on a normal day-to-day basis, you think it obviously makes sense. But then, when you apply them to the individual company, it doesn’t fit in many cases. It’s one of the reasons that so much is asked from the SME company in terms of documentation, in terms of paper to supply, which they sometimes don’t even have, so they cannot meet these criteria, or they have to ask their accountant to create these documents, which costs a lot of money and time.

If you look at the process closely, then your normal business owner would not understand why this would be the case, why they have to supply so many things.

To give an example, if a valuation of real estate is being made, banks always require that the evaluation has been made in their name, specifically for that specific bank. So if you want to go to another bank or you want to compare the two banks, you have to make two specific real estate valuations. One in the name of Bank A and the other in the name of Bank B, spending twice the amount of money on the same valuation. 

Q: So, are traditional banks supporting SMEs at all, or is there a complete lack of solutions in the market when you look at financial services and credit facilities?

A: Now, if you think honestly, then the banks are still playing a major role in financing SMEs, but there’s a clear trend visible that you see that the smaller the SME, the smaller the credit needs, the lower the so-called ‘access to finance’. 

And you see this in day-to-day life. I’ve been in the banking sector for 20-plus years, and you see that the, as I like to call it, limits of standardization are going up gradually, year by year. So where 10 or 15 years ago, a very small SME would only have access to standardized small credit lines, now also medium-sized companies with substantial credit needs are forced to operate more and more in a standardized way to accommodate the needs of the bank. So they are leaving an ever-growing gap. 

Also, there’s been a clear trend over the past 10-15 years that bank branch offices have been closing, so there are hardly any branches left. SMEs used to have a personal financial advisor or relationship manager at the local bank branch. And that has all disappeared. First to regional offices, and now to only a few larger hubs in the country. So if they want to speak to a person, it’s a different person every time, and they’re much farther away than they used to be. The local network and local knowledge of the SME landscape have all disappeared. 

This has created room for the elaborate landscape of financial advisers or intermediaries, who have an independent role, and who have taken the place of the classic relationship manager in being close to the customer and knowing the local networks. These financial intermediaries now have the challenge of seeing how they can fill in the financing need of an SME company, which is sometimes with bank financing, but a lot of the times also with alternative finance or a combination of both.

Q: Do you see a shift in how SMEs prefer to secure financing? Do they prefer to move away from the banks, or is it reluctantly?

A: I think a lot of them, for various reasons, are very happy to move away from the bank, but the bank still has cheap rates because they still have cheap funding. That’s one of the few things that banks still have going for them, but they’re not hugely popular anymore. Customers are more or less forced to move away to digital platforms because the banks are also moving away to push the customers to their online channels.

Some entrepreneurs value this, as long as your online value proposition is very good. Things like speed, ease of application, and having good customer support create a state-of-the-art customer experience for entrepreneurs, which are hugely important, but also to have a good human ‘escape’ option for all the many instances where the standardised online flow does not apply. With that, I meant that you can easily reach out to knowledgeable and experienced financial professionals who understand your business needs. I think a lot of SMEs would prefer a digital channel over a physical meeting if not needed, but would also like to just explain their business to a person with knowledge when it gets more difficult.

So that’s why we combined both of them, and we try to take the best of both worlds – to develop a world-class digital channel and solid digital tooling for our people, to support us in making better decisions and to support the customer better.

Q: How does your approach differ from the traditional banking models?

A: We just recently launched in the Netherlands, so we have to introduce new products to the market.

We started to identify the needs of the customers here. So we looked first in starting with the most simple products that would cover a very broad range of customer needs, which was a business loan for investments and a credit line for working capital. And then our next product was an invoice factoring solution.

With a credit line and factoring, and combining the two, we can cover a very wide range of their working capital needs. And our business loan is very flexible in its set-up, so we can tailor it to various investment needs. Now we are further launching and developing our customer portal specifically for the Dutch market, so SMEs can manage their loans and credit lines online if they want. Ultimately, the smeGo portal has to become the one-stop shop for SMEs in the Netherlands.

Q: Can you share any upcoming plans or strategies that smeGo has to continue driving growth and innovation within the SME sector of the Netherlands?

A: At the moment, team growth is our most important project, which is a real challenge because the labour market in the Netherlands is super tight. Beyond that, we’re looking at the customer needs to launch good products and to build a digital channel for our customers. For example, we are developing a customer dashboard so that they can easily manage their finances in one place. 

Q: Thanks so much for your time, Bas; this has been very enlightening.

A: No problem, it was a pleasure.