SME loans

This strategy provides loans to solid and profitable small or medium enterprises (SME’s) in the Netherlands. Loans to SME‘s in the Netherlands are most attractive for long-term investors, who are comfortable holding illiquid investments within their portfolios. Typical loan maturities are between six and eight years.

Compared to traditional fixed income assets, this strategy offers high lending rates above the swap curve. These rates exist across different direct lending strategies, but this specific strategy is supported by relatively low SME default rates and guarantees, provided by the European Investment Fund (EIF), with a 50% guarantee on the loan principal amount. 

 

Direct subordinated lending contributes positively to economic growth, job creation and business continuity by providing access to finance (SDG 8). Also, every investment made via the EIF programme needs to meet at least one of the EIF Eligibility Criteria (SDG 7, SDG 9).

These benefits should be weighed against the possible drawbacks of the loans. They are very illiquid and (currently) concentrated in Dutch SMEs. The returns also depend on the ability of the manager to invest in the most attractive loans under the right set of covenants (that are always included). A benefit is that a specialized manager can focus on the Dutch market and use established contacts with market participants such as banks and private equity investors.

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