SME loans

This strategy provides loans to solid and profitable small or medium-sized 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 tenors are between six and eight years.

Compared to traditional fixed income assets, this strategy offers attractive yield above the swap curve. These higher returns 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 improving access to finance (SDG 8). Each investment made through the EIF programme must also meet at least one of the EIF Eligibility Criteria (SDG 7, SDG 9).

These benefits should be weighed against certain drawbacks of the loans. They are illiquid and (currently) concentrated in Dutch SMEs. The returns also depend on the manager's ability to identify and invest in the most attractive opportunities under the right set of covenants (that are always applied). A benefit is that a specialized manager can focus on the Dutch market and leverage established relationships with market participants including banks and private equity investors.

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