The Dutch government will guarantee up to 75 per cent of certain loans originated by Funding Circle NL.
Funding Circle Netherlands has secured a powerful stamp of approval from the Dutch government.
The Ministry of Economic Affairs and Climate (EZ) has approved Funding Circle Netherlands as a participant in its Guarantee SME Credit (BKMB) scheme. For participating firms, typically major banks, this scheme provides a guarantee of up to 75 per cent of the loan amount for loans that fit within its criteria.
Close to 3,300 guarantees were issued under the BKMB in 2017, equal to €558m. But according to Jeroen Broekema (pictured), managing director of Funding Circle Netherlands, the vast majority of that sum came from the big three banks, and went to medium-sized businesses.
“Banks can easily say they’re increasing their lending in SME lending – and it’s true, they’re not lying, but it all goes to these medium-sized enterprises,” he said of banks utilising the scheme, during an interview with AltFi.
Funding Circle Netherlands is yet to issue a guaranteed loan, but its intention is to apply the guarantees to loans for smaller-sized businesses. It is currently working to find an institutional partner with an appetite for buying these loans – which Broekema concedes will offer lower interest rates, but also “much lower risk”.
It is rare for the EZ to authorise a non-bank lender as a participant in the guarantee programme; certainly it would appear that Funding Circle is the first fintech/marketplace lending platform to participate.
Only loans originated by Funding Circle’s Dutch arm will be eligible for the guarantees. To date, Funding Circle has lent approximately €75m to Dutch businesses, across about 1,600 loans. 65 per cent of its funding has come from institutional investors, with the remainder made up by individuals. Individual investors will not be given access to the BKMB loans.
Broekema said that Funding Circle had been through an “intense due diligence” process en route to being approved for the guarantees. “Getting this stamp of approval from the Dutch government is the main thing for us,” he said.
Funding Circle struck a landmark funding partnership with Aegon in August of last year, with the Dutch financial services giant pledging to lend £160m through the marketplace as the start of a four year plan.
These sorts of partnerships – with larger, longer-term investors – have often been spoken of as key to the maturation of the marketplace lending industry. The BKMB guarantee may help to lure further European investors to the business lending platform.
Join AltFi for its third annual Alternative Income Forum, exploring closed-ended funds (investment trusts) specialising in generating an income using alternative assets such as specialist finance, P2P lending, direct lending, asset leasing and more. Hear from the leading investors and fund managers in this rapidly growing market.