Bonds in SMEs
A bond is an investment product with which you lend money to an organization, institution or government. By means of a bond loan, you can receive financing as a company, the bondholder (the company) pays interest to the buyer. How does a bond loan work? It works as follows; an institution issues a loan, you can subscribe to this as an investor. The loan in question is then divided into denominations with a certain value, such as €700 or €1,500. These are the bonds. A fixed or variable interest rate is normally always agreed (the coupon). The agreements on the term, interest and the time of repayment may differ.
Which providers of SME bonds do you have in the Netherlands?
In the Netherlands, there are various parties that offer SME bonds. A well-known example is the SME Fund. They invest in fully-fledged companies that have a good future prospect and a strong market position. These companies have been active in their sector for at least 5 years, and thus provide a quality guarantee. Furthermore, an SME company must be established in the Netherlands and have a clear strategy with which the institution in question can outline a clear future perspective for the coming 5 years. For this reason, the SME Fund does not invest in organisations where matters are not clear and reliable, so that quality is maintained.
Are there any differences in SME Bonds?
The biggest difference can be seen, for example, between Dutch SME bonds and the German variant. German SME bonds are assigned a rating and are monitored by the German supervisor Bafin, while this is not yet the case in the Netherlands due to the high costs and the relatively small loan amounts. In our country, the Netherlands Authority for the Financial Markets (AFM) investigates the Dutch bond market, to warn investors of possible dangers and to provide information about bonds. As a bondholder, you have less certainty when it comes to a loan, this of course depends on the agreements you have made.
Why do SMEs issue bonds?
An SME bond is an ideal investment form for companies that are less dependent on the bank and want to spread their financing risk. The credit crisis has shown that banks can also lose their capital, which is why a lot of attention is required. In most cases, companies opt for the issue of a bond to pay for their working capital or to finance an investment in machinery and materials. The capital market is also seen as a good start to work towards an IPO.
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