Challenges of fulfilling the financing needs of flemish starters

Abstract

Starting companies are extremely important for the economy as they create many positive external effects. Hence, financial institutions bare the important role to support the needs of these starters, so that they have a higher chance of succeeding. PMV even goes a step further and was specifically created by the government to provide affordable financing to the Flemish starters. To achieve this goal, PMV is split up in several departments. At the highest level, it is divided into three branches. Namely, investments in infrastructure and real estate, equity-, and debt-financing. This research project covers PMV/z, which is focused on providing starting companies with debt-financing. More specifically, the project was carried out, under guidance of Emmanuel Damman, the head of “PMV/z-leningen”, which is the department that provides starters with subordinated loans. The scope of the project is to provide recommendations on the current products that “PMV/z-leningen” offers and to evaluate how these can be improved based on the market insights. First, the target group, namely the starters, was analyzed for specific trends. By analyzing data of the client base of “PMV/z-leningen”, we were able to map the locations of where these companies were founded and in which industry, they are active. Since many different industries exist, we based the conclusions on three categories, namely, old economy, knowledge intensive, and technology companies. It was observed that, although technology has such an important role in our daily lives, old economy companies still represent most of the starter landscape and sign up the highest growth. Furthermore, it was discovered that the province of Limburg is lagging behind technology companies compared to the other provinces. Second, taking a deeper look into the portfolio of PMV/z enabled us to gather more insights in how the department functions. Here, the question was asked what type of starters PMV/z is currently missing. Comparing the founder characteristics of its portfolio with the market distribution taught us that on average the entrepreneurs requesting PMV/z loans are younger than the average starters. They are also less likely to be a female, as PMV/z’s portfolio underrepresents female founders. Additionally, in terms of industry there is a serious overrepresentation of “Hospitality sector”, “Wholesale and retail trade”, and “Financial and insurance activities” causing an underrepresentation of other industries, such as “Construction and real estate” and “Human health and social work activities”. Moreover, although the number of loan requests from technology companies increases over the researched period, their percentage share relative to the total loan requests decreases over the same period. Third, although raw data gives clear views on certain trends, it is important not to miss the voice of starters as PMV/z’s products must have the right fit with starter’ needs. Performing twenty-eight interviews with both starters and organizations (financial and support) gave us a better view on how PMV/z could improve its products. Additionally, a survey was distributed to starters resulting in 523 responses. Both the survey and the interviews gave good insights into the needs of starters. More precisely, starters need clarity in the support and financing landscape and require financing in the early stages of their company. Further, starters want easier access to the solutions “PMV/z-leningen” offers. Lastly, to start and expand their business, starters value tailored advice, primarily through mentors. Finally, to make recommendations, all three sections are linked. In total, four recommendations were made. First, we have learned that it would be beneficial for “PMV/z-leningen” to facilitate more support during the application process as a big hurdle currently is that starters have difficulties successfully finishing the application. Possible solutions are changing the utilized language and providing assistance before and during the completion of the application. Second, by easing some requirements it would also significantly increase the number of starters reached. We believe that if these two recommendations are implemented, it would have a positive effect on the starter landscape. Third, it is crucial to improve the brand awareness of PMV/z, since currently only a minor percentage of starters are aware of it. Finally, to solve the fragmentation in the support market an overarching platform where starter can go to for all their financing and support needs should be established.