Non-bank financing can save the hospitality industry

With the reopening of the terraces on 28 April comes the first chance of recovery for the hospitality industry in the Netherlands in 2021. Figures from the CBS confirmed an unprecedented contraction in turnover for the hospitality industry in 2020: almost 34% compared to 2019. Reversing the contraction is the goal of the easing, but where will the hospitality industry find the money to restart quickly? Qeld, Fintech lender, spots a serious lack of financing options for the sector in the Netherlands.

Amsterdam, 21 April 2021 - Qeld: "With the phasing out of current corona support schemes and the tightening of the associated selection criteria, part of the entrepreneurial Netherlands seems to have no chance of getting an extra financial buffer for new investments. It is precisely for this reason that flexible, non-bank financing options for the hospitality industry have become more important than ever before. Non-bank funding is a form of financing that is not provided by banks, such as crowdfunding, credit unions, direct lending and SME exchanges. The segment of non-bank financing already grew to over €2.6 billion in 2019, lent to over 50,000 SMEs in the Netherlands."

Cash flow uncertainties in times of crisis

Despite the fact that the current support and recovery package offers help where strictly necessary, such as compensation for fixed costs, the chance of extra financing via the TVL or NOW schemes for new investments - such as the expansion of a terrace - is limited. From the hospitality sector, including the Royal Dutch Hotel and Catering Association, comes the complaint that Dutch banks do not want to enter into discussions about business loans, given the great uncertainties about cash flow in times of crisis. This was already signalled in the 2019 study 'SME bank financing in a European perspective' by the Netherlands Bureau for Economic Policy Analysis (CPB). This study found that Dutch banks only lend to SMEs on a limited basis, the possible reasons being the tighter risk assessment since the financial crisis (2008) and the lack of financial guarantees for entrepreneurs.

No bank loan for hospitality sector

This means that many hospitality entrepreneurs who saw their turnover decrease in 2020 will automatically not qualify for a bank loan. This makes non-bank financing options for the hospitality industry more important than ever. Non-bank parties often have a more flexible policy regarding risk assessment and company turnover, which gives entrepreneurs a realistic chance of recovery in times of crisis. 

Difficult times in hospitality sector

The corona crisis has far-reaching consequences for the entire SME sector in the Netherlands, but the hardest hit is the hotel and catering industry. The CBS recently published a report on the loss of turnover of hotels, cafés and restaurants as a result of the corona crisis. With an average drop in turnover of 33.9% compared to 2019, it was once again confirmed that this sector has been hit unprecedentedly hard. Restaurants saw a drop of 34.6%, cafes 41.7% and hotels a loss in turnover of over 50%. 

The decline in revenues in the hospitality sector in 2020 and early 2021 is also being felt by non-banking finance providers. Qeld We have experienced a clear decrease in loan applications from the hospitality industry for investment or growth over the past 13 months, as bridging has become the main objective. Entrepreneurs looking for a bridging loan turned to the government and support schemes such as TVL and NOW. However, with the imminent relaxation of the corona measures, bridging loans such as the TVL for restaurants and cafes are inadequate.

Need for fast, flexible business credit

Now that the hospitality industry is allowed to reopen, fast financing for new investments such as stock, staff and the expansion of terraces is necessary to facilitate recovery. Our experts therefore recommend that all hotel, restaurant and catering entrepreneurs obtain information about the various non-bank financing options, as these can make the difference between merely bridging the crisis or actually overcoming it when the terraces are allowed to partially reopen on 28 April...