In the eyes of non-bank SME lenders, the Dutch market may seem small when compared to the UK or Germany, let alone the US. Nevertheless, Dutch SMEs have been a time-honoured engine of growth and innovation and the driver of international trade.
SMEs complain about the lack of service they receive from domestic banks. Non-bank lenders are a logical alternative.
However, offerings by non-bank SME lending platforms have remained scattered and small in comparison to the Dutch banks' €250bn exposure to SMEs in 2019. Still, Dutch banks have reduced their credit lines to SMEs by over €50bn since 2012 (source NVB).
Roodhals assists aspiring SME lending platforms by connecting their lending strategy to a domestic or international funding solution. We find that reaching scale is often not the only important goal in SME lending. Forming a good match with your funding institution and having access to the working capital you need to grow the business are equally important. A data-driven approach seems to work best for a granular loan portfolio, while a fundamentals-based approach is preferred for a more concentrated loan book.