Small to medium-sized enterprises (SMEs) are crucial for economic growth. They are businesses that fall within certain size criteria, typically based on the number of employees and annual revenue. These significantly contribute to the creation of jobs and employ a sizable portion of the workforce. They also promote innovation and entrepreneurship through their flexibility to test out novel technological advancements.
SME Finance is a company that addresses financial challenges often encountered by SMEs. The company contributes to the growth and sustainability of these businesses that larger corporations may overlook. In this interview, we talked with the CEO of SME Finance to discuss their expansion into the Netherlands, the benefits of financial solutions specifically targeted towards SMEs, and leveraging AI in making business financing more accessible and inclusive.
Bas: SME Finance aims to become the leading European financing partner for European SMEs. A logical next step of expansion into Western Europe is the Netherlands. So stepping closer to its goal of becoming the main financing marketplace provider in the whole of Europe. Also, the expansion of the new financing provider could lead to increased competition among existing financial service providers, resulting in more choices and potentially better services for SMEs.
The number of companies has been increasing every year (Figure 1). In Q3 2010, there were 1.3 million companies in the Netherlands, but now the Netherlands is home to a total of 2 million companies (Q3 2021). The vast majority of companies employ fewer than five people (93%). From 2 million companies, two-thirds (1.3 million) of companies are sole proprietorships, 404,500 private limited companies, 214,300 other natural persons, and 53,400 other legal persons. Research shows that, in general, the smaller the company, the more difficult it is to obtain financing.
According to the annual report prepared by European Commission (Annual Report on European SMEs 2020/2021, July 2021), the Netherlands has the largest start-up population in the EU (8915).
Furthermore, the Netherlands has an excellent business climate. According to the World Economic Forum's Global Competitiveness Report 2019, it has the most competitive economy in Europe.
Banks play a vital role in the financing of Dutch companies, especially SMEs. The total amount of outstanding loans to non-financial companies in the Netherlands is approximately 250 billion EUR, of which almost 50% is lent to SMEs based on Central Bank data. SME Finance's expansion into the Dutch market can help address this issue by offering convenient alternative financing solutions to SMEs, thereby promoting their growth and contributing to economic development, will offer more financing options for the market, for example, revenue-based financing to digital businesses. The Netherlands is probably the most digitized market in Europe, so business owners also need innovative solutions that SME Finance can offer. SME Finance is revolutionizing the way small and medium-sized enterprises, e-shops, digital businesses, and freelancers in Europe access working capital. With an AI-driven financing platform, SME Finance delivers accurate, unbiased lending decisions within just one hour. Innovative solutions include a single platform SmeGo and mobile app, a comprehensive financial service infrastructure designed to empower and support European entrepreneurs.
SME Finance offers data-driven financial services for SMEs, including business loans and credit line, invoice finance, factoring, leasing and revenue-based financing. Moreover offer embedded finance solutions to non-financial businesses.
SME Finance‘s team believe that providing a full range of services and support tailored to SME customer’s needs and customizable by them via digital channels is what’s needed in the future by creating the financing ecosystem.
SME Finance’s team provides a better, faster, and fairer alternative to traditional banks or VC equity funding, even for companies with short trading histories.
In summary, SME Finance's expansion into the Dutch market addresses several current news agenda issues, such as improving access to financing for SMEs, contributing to economic growth efforts, promoting digitalization and innovation in the financial sector, and supporting regional development in Europe.
Bas: SME Finance's team provides a better, faster, and fairer alternative to traditional banks or VC equity funding, even for companies with short trading histories. We help businesses to scale and grow no matter of business size or type. And the value we bring - we serve the underbanked SME sector.
Furthermore, compared to other Alternative finance competitors, SME Finance provides a very complete range of financing products, so we can better tailor our offer to the needs of the customer, and offer the customer the best product for its growth plans.
According to the European Commission, SMEs in the European Union face a €176 billion funding gap and a loan rejection rate greater than 40%.
Bas: In the Netherlands we recently financed a customer that needed the funds before the end of the month to secure an important deal for him. None of the banks but also very few alternatives could conduct the underwriting, client onboarding and disbursement of the funds in just a couple of days time. We were able to do that and had the money in the client's bank account well within the set timeframe.
While our operations in the Netherlands are relatively recent, we have an impressive track record of supporting SMEs in the Baltics and Finland. Take, for example, a unique client we financed in Finland - a company that produces sneakers from used coffee grounds. We've also provided financial assistance to numerous clients across diverse sectors like agriculture, real estate, and manufacturing. We are often the first to believe in and back remarkable business ideas.
Common challenges that these businesses face include being too nascent for traditional banks to consider, lacking sufficient financial data, or requiring quick access to funds.
We also cater to the needs of innovators seeking a digital-first financing experience. Regardless of the unique circumstances each SME faces, we are committed to providing efficient, convenient, and rapid financial solutions.
Bas: SME Finance offers several key advantages over traditional financial institutions in delivering financial solutions to SMEs.
Firstly, our approach is driven by speed, fairness, and flexibility. We provide rapid, equitable financing alternatives, accommodating even businesses with short trading histories that might be overlooked by traditional banks or VC equity funding.
Secondly, we believe in the power of bespoke services. We are committed to offering a comprehensive suite of services specifically tailored to the unique needs of SMEs. We understand that every business has different requirements and needs, and therefore, we allow our customers to customize their financial solutions through digital channels.
Finally, we place the customer first. Unlike traditional banks, which may apply a one-size-fits-all approach, we prioritize knowing our customers thoroughly. This approach enables us to provide optimal, personalized solutions that best fit their unique business context. Through this customer-first approach, we aim to redefine the SME financing experience.
Bas: We leverage AI to drive our underwriting scoring system, thus ensuring a more efficient, objective, and data-driven decision-making process compared to traditional banks.
For example, for revenue-based financing the integration of AI and open banking APIs streamlines the financing process, making it quicker, more user-friendly, and unbiased. By focusing on real-time trading and cash flow data, our system can assess creditworthiness more holistically, rather than relying solely on historical financial performance or credit scores.
Moreover, we've greatly reduced decision times for loan applications. Unlike traditional banks that may take weeks or months to process a loan, our AI-driven system allows for lending decisions to be made in less than an hour, with funds transferred within 24 hours.
In addition, we embrace the digital nature of today's business world, offering a fully remote and digital process. This approach significantly reduces the bureaucratic burden often encountered when seeking business expansion financing, freeing up valuable time for entrepreneurs to focus on their core business.
Through the use of AI, we are not only making business financing more accessible and efficient but are also creating a more inclusive and unbiased lending environment.
Bas: Yes, the plans include Germany and Spain.
