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Money in abundance, yet difficult to finance'.

April 8, 2019

The financing market has changed significantly. Dozens of lenders have been added and the financing cycle has become significantly shorter. As a result, according to Ronald van Rijn and Frank Steenhuisen of JBR, many companies are almost permanently struggling with their financing.

'It's a strange paradox: money is almost free, but hard to get.'

It is now more than ten years since the financial crisis sent shock waves through the Dutch business world. From one day to the next, all counters were closed: it was even easier to win the soccer pool than to find a bank willing to finance an acquisition. Fortunately, those days are now some time behind us, but the financing landscape has changed dramatically since then, according to Frank Steenhuisen of consultancy firm JBR from Zeist.

Steenhuisen: Changes that were only talked about at the time have now become reality. On the supply side, in addition to the three major banks, dozens of new lenders have emerged. These include informals, family offices, regular investment companies as well as leasing and factoring companies. Banks still account for the majority of financing, but the big ticket items in particular are usually provided by several parties.

As a result, according to colleague Ronald van Rijn, obtaining financing anno 2019 has become a game of chess on multiple boards.

Van Rijn: "Suppose you want to borrow or refinance an amount of 20 million euros. Such an amount could be split up into a bank loan, a subordinated loan, a piece of equity and additional asset-based working capital financing. For each part you often have to negotiate with different parties, and each of those parties has its own wishes and possibilities regarding the capital to be contributed, the risk and the return. I wish you an enjoyable game.

Top SME

It is these kinds of challenges that the advisors at JBR like to sink their teeth into. JBR is an independent consultancy and has been active in the field of strategic issues, corporate finance and restructuring for over thirty-five years. The roots of JBR lie in Rotterdam, where the firm was founded in 1984 by its principals Jelsma, Van Biert and Randoe. Today only the B (Kees van Biert) is still involved in the company.

A total of 30 people currently work at JBR, including 18 consultants and 5 associates. Although the consultancy moved to Zeist in the early 1990s, many of JBR 's clients still come from the maritime, offshore and energy sectors. The other three sectors in which JBR operates are food production & agriculture, healthcare and digital transformation & information technology.

In the field of refinancing and restructuring, JBR advises clients from almost all sectors. The clients of JBR are mostly from the upper end of the SME sector. Foreign companies and listed or internationally operating companies also know how to find their way to Zeist. Based on their financing needs, the amounts involved are often substantial.

Short durations

While the range and variety of financial lenders has increased significantly, the term of many loans has actually become shorter.

Steenhuisen: Before the financial crisis, terms of ten or even twenty years were not uncommon. Now that derivatives are out of favour due to negative publicity, covering the interest rate risk has become a problem for smaller companies. As a result, most loans currently have a term of five to seven years at most. As a result, in recent years there has also been a large 'revision market' of companies that need to refinance their existing loans.

According to Steenhuisen, who prior to JBR worked for more than thirty years at ABN Amro and the Rabobank Group, including as JBR deputy director of Special Management, many companies nowadays are permanently occupied with their financing. For a loan with a term of five years, it is sensible to review all the conditions after three years. You also need to think about how and with whom you might want to enter into a new financing arrangement in two years' time. It is better to start in time, even if there is no immediate need. Because everyone knows: the worst time to start looking for financing is when you really need it.

Paradox

If you believe the advertisements of parties like Swish Fund, New10 and Qredits, getting credit is a matter of filling out a few forms online. But nothing could be further from the truth, as Van Rijn points out. Although there are more providers than ever, obtaining financing has not become any easier. There is enough money in the market,' says Van Rijn.

But all financiers are looking for the best deals; everyone is very selective, especially when it comes to financing SMEs.' This means that entrepreneurs need to prepare their financing applications very well, advises Steenhuisen. You really need to have a well-founded story. At the bank, you often only get one chance. And then you have to go through a lot of gates before everything is finalized.

After all, according to Van Rijn it is a strange situation: 'The savings rate is zero, money is almost free and yet it is very difficult for companies to get money. That's the paradox of the current market.

At the bank you often only get one chance. And then you have to go through a lot of gates before everything is complete.

 

Source of article: Brookz article 'Money in abundance, yet hard to finance'