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Schroders enters into market for SME direct lending through a strategic relationship with NEOS

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Schroders has entered into a strategic relationship with Dutch direct lending firm NEOS Business Finance. Schroders has acquired a 25 per cent stake in the business.

Launched in 2012, NEOS Business Finance provides institutional investors access to an alternative debt financing platform for Dutch small and medium-sized enterprises (SMEs). The company has developed an approach to give SMEs access to small to medium size loans through a standardised issuance and loan terms process.

NEOS Business Finance will provide investment advisory services to Schroders in connection with the management of investment funds of Schroders' clients investing in SME financing.

NEOS Business Finance has an extensive network and broad client base. To date, NEOS Business Finance has launched one investment fund funded by two large Dutch pension funds. In addition NEOS Business Finance works with the largest Dutch bank ABN Amro to source SMEs in need of financing. This complements Dutch government policy which encourages pension funds and other institutions to actively participate in local economies.

Philippe Lespinard (pictured) Co-Head of Fixed Income at Schroders, says: "Small and medium enterprises (SMEs) in Europe are increasingly looking to obtain debt financing from non-bank lenders. Part of this trend is explained by the decreasing supply of credit in that space by commercial banks who face increasingly onerous capital requirements on loans perceived as risky by regulators and supervisors. On the demand side, borrowers expect faster approval times and lower collateral requirements than afforded by banks’ traditional processes and systems. These conflicting trends open up a space for non-bank actors to provide growth financing to SMEs on simpler and faster terms.

In parallel, sophisticated institutional investors are becoming more familiar with the concept of providing growth financing to SMEs in return for higher yields than are available in the public markets.  That interest is also coupled with a desire to make a positive social impact on the community by favouring local job creation. We are excited at the prospect of matching the needs of our institutional clients with the innovative skills of a recognised leader in this growing marketplace."

Quirijn Haak Chief Executive Officer at NEOS Business Finance, says: “The support of Schroders proves that direct lending to SME companies in a professional setting and based on quality analysis has become a good alternative for companies looking for medium sized loans. We are confident that the mutual commitment on which this relationship is based will provide a good basis for further cooperation and will benefit both existing and future clients. We also believe that the complementary skills and existing networks of the two organisations will lead to growth in this field of SME direct lending, which will benefit the SME businesses in local economies.”

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