copy the linklink copied!6. Belgium
copy the linklink copied!Key Facts on SME financing
In 2016, SMEs dominated the business enterprise landscape in Belgium, accounting for 99.85% of all firms.
The outstanding stock of SME loans expanded 4.5% in 2018, 2.6 percentage points down from its growth rate the previous year.
SME interest rates continued to decrease, and averaged 1.6% in 2018. The interest rate spread between loans charged to large enterprises and loans charged to SMEs was 25 basis points in 2018.
Survey data illustrates that lending conditions eased between 2013 and the end of 2015, and have remained relatively stable until the end of 2018. A deterioration of credit conditions has been reported for the fourth quarter of 2018 and the first quarter of 2019.
After having receded moderately in 2017 (-3.49%), leasing volumes expanded 4.62% in 2018. Overall, factoring continues to be more widely used by Belgian companies. Factoring expanded strongly in 2018, growing 9.62% during the year and achieving rates of more than 10% every year between 2012 and 2017 (with the exception of 2016, where the factoring growth rate was 2.74%). Factoring contributed to almost 17% of GDP in 2018, as opposed to only 6.3% of GDP in 2008.
Venture and growth capital investments continue to show considerable variation due to the small number of deals conducted every year. Total venture and growth capital investments decreased 5.38% in 2018, after having decreased 9% in 2017.
Average payment delays for business to business transactions decreased steadily during the last ten years. After having decreased from a 17-day average in 2009 to an 8-day average in 2017, payment delays expanded to a 9-day average in 2018.
After a steady decrease of bankruptcies during the 2014-2016 period, the number of registered failures rose to 9 968 (+8.7%) in 2017 before receding again in 2018 to 9 860 (-1.08%).
Policy initiatives to ease SMEs’ access to finance are taken at the federal and regional level.
The Flemish region launched the Co-financing+ initiative, allowing companies to borrow up to four times their own contribution with a minimum of EUR 350 000 and a maximum of EUR 700 000.
The Brussels-Capital region launched the Bruseed initiative. Bruseed is a capital raising tool for innovative early-stage companies who provide loans, equity participations and convertible loans up to EUR 250 000.
The Federal government supported the signing of a new Code of Conduct for SME Financing. This code of conduct will contribute to improve the information provided to entrepreneurs contracting loans and limit funding loss indemnity to EUR 2 million.
copy the linklink copied!SMEs in the national economy
In 2016, SMEs dominated the business enterprise landscape in Belgium, accounting for 99.85% of all firms. Micro-enterprises with up to 9 employees constituted 94.73% of all firms, while large enterprises with over 250 employees accounted for only 0.15% of Belgian businesses.
copy the linklink copied!SME lending
SME statistics on lending consider non-financial corporations that filed annual accounts at least once in the last 60 months, i.e. corporations for which size related variables are available. Non-financial corporations are classified on the basis of their annual accounts as follows:
Small companies: those having deposited an abbreviated or a micro model1.
Medium-sized companies: those having deposited a full model, but whose turnover does not exceed EUR 45 000 000 over two consecutive years.
Large companies: those having filed a full model and having a turnover of more than EUR 45 000 000 for two consecutive years.
Outstanding business loans to SMEs increased 46.1% over 2007-2018. Except for a slight decrease in 2009, outstanding business loans to SMEs increased steadily year-on-year over 2007-2012 by a cumulative 32.4%. However, lending to SMEs declined slightly in 2013 and fell 8% in 2014. From 2015 to 2018, outstanding loans to SMEs expanded 15.9% to EUR 121 million. Credit growth has been stimulated by low interest rates applied to new bank loans and a rise in business confidence during the reference period2.
Developments in outstanding loans to enterprises follow a similar trend than those in total outstanding loans to SMEs, with the exception of 2016, when growth in total outstanding loans dipped by 0.75% before bouncing back 6.2% in 2017 and 3.8% in 2018 to EUR 180.3 million. The share of SME loans in total outstanding loans ranged between 59.6% and 67.6%, and averaged 64.5% for the reference period.
copy the linklink copied!Credit conditions
The average interest rate granted to SMEs has decreased for nearly ten years. In 2018, the average SME interest rate was 1.6%, down from 5.7% in 2008. Although interest rates charged to small firms remain systematically higher than rates charged to large corporations, the spread between SMEs and large corporation rates has steadily declined. In 2008, the interest rate spread was 65 basis points compared to 25 basis points in 2018.
In its quarterly Bank Lending Survey, the European Central Bank summarises changes in loan requirements from the main financial institutions. The survey highlights a general tightening of lending conditions in 2008-09, as well as in 2012. Credit conditions eased throughout the Euro area, and especially in Belgium from 2013 to 2018. However, a deterioration in credit conditions has been reported since the fourth quarter of 2018.
copy the linklink copied!Alternative sources of SME financing
Leasing
Leasing and factoring are two substantial sources of finance for Belgian enterprises. Total leasing production reached EUR 4 856 million in 2008, corresponding to 8.6% of gross fixed capital formation. After a 22.7% decrease in 2009 to EUR 3 756 million, total leasing production gradually recovered to EUR 4 800 million in 2015. In 2016, leasing grew by 25% to EUR 6 009 million before receding to EUR 5 800 million in 2017 (-3.49% year-on-year).Total leasing bounced back to EUR 6 068 million in 2018 and contributed to 8.21 % of gross fixed capital formation.
Factoring
Factoring turnover grew consistently and tripled during the reference period. Factoring turnover grew 9.61% in 2018, totalling EUR 74 340 million by year-end. Factoring has continued to contribute to GDP, accounting for almost 17% of GDP in 2018, against only 6.4% of GDP in 2008.
Venture Capital and growth capital
In Belgium, venture capital and its various sub-segments display significant variation on a yearly basis. This volatility can be explained, among other factors, by the limited number of registered transactions for this type of financing. As such, venture capital is highly sensitive to extreme swings.
Total investments in venture and growth capital decreased by 5.4% in 2018 and totalled EUR 725.9 million. This investment value was above the average annual investment level of EUR 562.63 million for the reference period. Venture and growth capital can be divided into several sub-segments, according to the stage of development of companies receiving investments.
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Seed capital investments (which are generally considered to be the first capital investments into companies) came to a stop in 2015, with no registered transactions. Seed capital investments recovered in 2016 and increased sharply in 2017 before receding to EUR 39.9 million in 2018. As recent trends indicate, seed capital is subject to the largest annual variations in venture capital. During the reference period, average annual investments in seed capital amounted to approximately EUR 11.06 million.
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Start-up capital investments increased sharply by 109.5% in 2018, reaching EUR 178.6 million. The average annual start-up capital investment during the reference period was EUR 75.53 million.
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Later-stage financing decreased by 50.5% in 2018, amounting to EUR 36.45 million at year-end. The average annual late stage investment was about EUR 57.8 million for the reference period.
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Growth capital amounted to EUR 216 million in 2018, representing a 39.7% decrease compared to 2017. The annual average investment in this category was EUR 273.88 million for the period under review.
Total private equity increased by 1.73% in 2018 and amounted to EUR 1 955 million. This expansion was solely caused by the growth of Buyout capital which increased 9.7% and reached EUR 1 483.35 million.
The chart displayed above reveals a sectoral breakdown of venture capital and total private equity in Belgium. Venture capital activity in Belgium is mainly focused on biotech and healthcare and to a lesser extent on the ICT sector. The biotech sector captured 61.2% of venture capital investments in 2018, which amount to EUR 156 million. The ICT sector represents 24% or EUR 61.2 million of venture capital investments.
The others sectors benefiting from venture capital investments are, in decreasing order: business products and services (4.9%), financial and insurance activities (2.9 %), consumer goods and services (2.9%), energy and environment (2.6%) and chemicals and materials (0.9%).
The chemical and materials sector stands out when considering the total amount of private equity investments. This sector attracts 44.1% of all private equity in 2018, which amounts to EUR 863 million3.
Among the other sectors attracting a substantial part of all private equity funds we find the biotech and healthcare sector with a share of 23.7% (EUR 463 million), ICT with 11.6% (EUR 225.8 million), business products and services with 10,3% (EUR 202 million) and consumer goods and services with4.6% (EUR 89.1 million).
copy the linklink copied!Other indicators
Payment delays
Intrum Justitia publishes an annual survey aimed at assessing payment delays in Europe. Average payment delays in Belgium for the B2B segment were 9 days in 2018. This is a considerable improvement over the past 10 years. Between 2009 and 2018, the average payment period was estimated at 14.5 days.
Bankruptcies
The number of bankruptcies increased steadily over the 2008-13 period, after which the trend reversed between 2014 and 2016. 2017 and 2018 saw an increase in the number of bankruptcies (approximately 7.7% over two years), which totalled 9 878 at the end of the reference period.
Developments in SME bankruptcies follow a similar trend, with 7.9% expansion over the last two years and a total at 9 860 bankruptcies.
copy the linklink copied!Government policy response
Regional segmentation
Public initiatives in the field of SME finance translate into federal and regional programmes. Guarantee programmes protect the collateral pledged by entrepreneurs and SMEs. They also provide a safety net for bankers willing to accept loan applications from borrowers deemed to have insufficient collateral for traditional loans, which is typically one of the main reasons underlying credit denials.
Following the regionalization of the "Fonds de participation" on 1 July 2014, the administration of loans and public guarantees is being dealt with by the regions. The criteria for granting loans and guarantees are likely to diverge depending on regional priorities.
copy the linklink copied!Policy Measures
Flemish Region
PMV / z launches new loan for existing SMEs: Co-financing +
In addition to the current range of financing options, PMV / z has launched a new product, Co-financing +, allowing stable companies to borrow up to 4 times their own contribution with a minimum of EUR 350 000 and a maximum of EUR 700 000. The conditions of the loan are similar to the existing Co-financing product, but this version is specifically aimed at existing SMEs that can present a track record of positive cash flow. This is also a formula wherebyother financial institutions, such as banks and investment funds, contribute part of the funds. The term of the loan is 3 to 10 years with an interest rate of 5.5%. The product was launched in November 2018.
New grant agreement with Business Angel Network Vlaanderen
The Flemish government concluded a new grant agreement with the non-profit organization BAN Vlaanderen. As a business angel network, BAN Vlaanderen connects starting or growing small and medium-sized companies with private, informal investors (business angels). In doing so, BAN does not act as an investor itself, but acts as a platform for companies and potential capital providers so that they can find each other more easily. After a positive evaluation of the expiring grant agreement, the government decided to support BAN Vlaanderen for the next four years with a grant of 1 920 000 euros. That is a substantial increase compared to the 1 232 000 euros from the past period. In return, BAN Vlaanderen commits to triple the number of files, increase the projects launched within the network by 50% and increase the number of deals by 15% annually. This grant agreement started in January 2019.New cooperation agreement with nv Limburgse Reconversie Maatschappij
In addition to this, the Flemish Government approved a new cooperation agreement with Limburgse Reconversie Maatschappij (LRM). It has been concluded for a period of 5 years starting on the 5 April 2019. LRM is an investment company that develops and stimulates economic growth in Limburg. They provide a solid foundation, allowing companies and projects to grow.
Brussels-Capital Region
Bruseed
Bruseed is a capital raising tool for innovative early-stage companies which aims to complete the existing public offer, strengthen the insufficient private offer and participate in the regional response to strengthen technology transfer and develop innovative entrepreneurship. The company must be an SME with less than 5 years of activity and located in the Brussels-Capital region. Bruseed provide loans, equity participation or convertible loans up to EUR 250 000. Finance.brussels co-finances projects up to a maximum of 50% of the financial needs. It will therefore be necessary for the project leader to find a private source of financing to complete his project.
Federal Government
Signing of a new Code of Conduct for SME Financing
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On 27 February 2018, UCM, UNIZO, SNI and Febelfin, supported by the Minister for the middle classes, SMEs,, the self-employed, agriculture and social Integration, presented a revised version of the Code of conduct on SME Finance. This new Code of conduct contributes, among other things, to further improve the information provided to entrepreneurs contracting a loan. The revised code applies since Thursday, March 1 2018. This Code aims to establish a strengthened credit relationship, in particular through the following measures:The main public guarantees and accompanying and support measures are listed on the website www.financementdesentreprises.be. When an entrepreneur applies for a loan, this overview is presented to him. If this information is relevant to him, the public guarantees are also explained to him.
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The entrepreneur is informed of the main characteristics of the securities or guarantees requested by the lender and their impact on the credit application. On www.financementdesentreprises.be, fact sheets are available on the most commonly used guarantees and securities. It also explains why security may be requested.
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If the lender refuses to release a security or guarantee, he shall give written reasons for his refusal. The Code of Conduct includes a non-exhaustive list of possible reasons for refusal. If the contractor so wishes, the lender shall explain orally or in writing why he or she invokes one or more reasons.
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For loans up to a maximum of 1 million euros, contracted since 10 January 2014, the funding loss was limited to a maximum of six months' interest. This limit is increased to EUR 2 million.
References
BLV-ABL – Association belge de Leasing, Annual Report 2018, p. 32, 41 http://www.blv-abl.be/fr/concernant-labl/rapport-annuel
ECB, ECB Statistical Data Warehouse, Safe Survey https://sdw.ecb.europa.eu
EU Federation – Factoring and Commercial Finance, EUF Statistics, 28 may 2019 https://euf.eu.com/total-factoring.html
FPS Economy, Statistics Belgium, BeStat https://bestat.statbel.fgov.be/bestat/index.xhtml
Intrum Justicia, European Payment Report 2019, p.24 https://www.intrum.com/media/2772/epr-2018.pdf
Invest Europe, European Private Equity Activity Data 2018 https://www.investeurope.eu/research/activity-data/annual-activity-statistics/
National Bank of Belgium, National Bank of Belgium Online Statistics, Central Corporate Credit Register https://stat.nbb.be
National Bank of Belgium, National Bank of Belgium Online Statistics, Monthly Business Survey https://stat.nbb.be
OECD (2015), Entrepreneurship at a Glance 2015, OECD Publishing, Paris, https://doi.org/10.1787/entrepreneur_aag-2015-en
Notes
← 1. Most companies are required to prepare their annual accounts according to a standard model. However, some companies are required to draw up their annual accounts according to a specific scheme, pursuant to the law applicable to them. One of three standard models applies, depending on the size of the company:
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A full model for 'large' companies and all listed companies
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An abbreviated model for small companies
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A micro model for micro-companies
← 2. National Bank of Belgium – Monthly business survey.
← 3. This is mainly due to the buyout category where the chemical and materials sector captured 57.8% of all investments or EUR 857.7 million. The two other sectors attracting a significant share of buyout capital are biotech and healthcare with 20,7% or EUR 307.3 million and business products and services with 9,7% or EUR 143.6 million. All other sectors are below 5% and most are around 0% or 1%.
Metadata, Legal and Rights
https://doi.org/10.1787/061fe03d-en
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