How to fund your business in Flanders: 7 popular options

One of the quickest and easiest ways to get started is to use your own funds, if you have them. There are various reasons why this is an interesting option. For example:

• Self-funding causes external financiers to trust your business idea because of your confidence in your start-up and the risks you are willing to take for it – which in turn leads to external financing.
• Self-funding is essential as a buffer to deal with potential setbacks.

Note: depending on your sector, self-funding should be between 20% and 40% of your project in the form of cash or in-kind contributions.

There are three ways of involving family, friends and fans in the start-up of your Flanders-based enterprise:

• co-shareholders – involve people in your environment to finance your project by making them co-shareholders;
• borrowing – borrow money from family, friends and fans (this will be considered a quasi-entity by other creditors, if the lender declares this loan subordinate to the other creditors);
• win-win loans – with this type of loan, the government of Flanders actively supports you when involving family, friends and fans in funding your business.

Flanders offers support for win-win loans by providing an annual tax discount of 2.5% (on the amount of the loan) to those who grant up to EUR 75,000 to friends, family members or acquaintances who own a company in Flanders for a period of 5 to 10 years.

Borrowers should know that win-win loans:  

• make it easier for you to find start-up capital;
• are subordinated, must amount to a maximum of EUR 300,000 and must run for 5 to 10 years (with monthly, quarterly, biannual or annual repayments);
• are available to independent SMEs with fewer than 250 employees and annual turnovers below EUR 50 million, or a balance sheet total below EUR 43 million.

(Note: ‘independent’ means that, if there is a relationship of participation with other enterprises of 25% or more of the capital of voting rights, the SME’s consolidated figures must satisfy the criteria mentioned above. A larger shareholdership by risk capital companies, universities or non-profit research centers is also permitted.)

Lenders should know that they:

• must be a natural person living in Flanders who arranges the WIN-WIN loan outside the framework of his or her professional activities.
• may not be an employee of the borrower.
• may not be the spouse or the legally cohabiting partner of the borrower if the latter is self-employed.
• may not be a borrower of another WIN-WIN loan for the entire duration of the WIN-WIN loan.

(Good to know: if the borrower is a company, the lender may not be a manager, director or shareholder of that company, or a spouse or legally cohabitating partner of one of them.)

Crowdfunding allows you to get the first part of your required financing online. Below are just a handful of crowdfunding platforms available in Flanders:

• www.angel.me – offers support to innovative start-ups in many sectors through equity or reward;
• www.bolero-crowdfunding.be – targets financial investments such as equities or bonds;
• www.crowdfunding.gent – is operated by the city of Ghent and offers financial support through donations or in exchange for symbolic attention;
• www.lookandfin.be – targets growing SMEs and provides funding through loans exclusively;
• www.spreds.com – acts as an investment platform for the general public and private investors;
• www.socrowd.be – attracts private capital for sustainable initiatives in the social, cultural and healthcare industries.

Venture capital is mainly for businesses that can show clearly that they have quite a bit of growth potential, as this type of funding depends on venture capitalists’ calculation of their returns on investment. While it comes in several forms, there are three main types of venture capitalists:

• public venture capitalists (governmental entities);
• private venture capitalists (often affiliated with banks or large financial groups);
• business angels (private individuals).

Zooming in on the latter category, the Business Angels Network (BAN) Flanders is one of the main go-to organizations. This network is the result of a fusion of four Flanders-based BANs and has the support of the government of Flanders. Overall, BAN Flanders coordinates interactions between anonymous informal investors and promising companies. It also provides venture capital to young, starting and growing enterprises that are not in the retail, catering or project development industries.  

PMV corporate loans are long-term finance solutions tailored to the needs of SMEs and large companies. Amounting to a minimum of EUR 350,000 and a maximum of EUR 5 million, they can be subordinated (mezzanine financing) or non-subordinated.
How do PMV corporate loans differ from traditional (bank) finance? 

• The loans have a longer repayment term, running for an average period of 7 years and a maximum of 10 years. 
• The loans are more flexible. You can, for instance, choose to draw down the loan in one or more instalments, defer capital repayments for at least the first 2 years, repay the entire amount on the final due date, repay the loan early, etc. 
• Providing only part of your funding needs, the loans are always issued as part of a co-financing arrangement involving banks, shareholders, managers, financial investors and so on. 

Many banks in Flanders offer government support to start-ups, awarded in several forms with different requirements. Below are the details of some of these bank-sponsored financing options. 

Offered by the European Investment Bank (EIB) and its partners, Belfius, BNP Paribas Fortis, ING and KBC, this investment credit scheme includes tangible and intangible investments within the EU of less than EUR 25 million (excluding purchase of land, pure financial transactions or the refinancing of existing loans).

It aims to support investment projects of European SMEs of fewer than 250 employees, as well as mid-sized enterprises of fewer than 3000 employees. 

Note: this option is not available to subsidiaries and holdings of industrial groups or enterprises active in the tobacco, ammunition, weapons or gambling sectors.

‘Impulskredieten’ are microcredit schemes that do not involve bank loans. They are available through Hefboom, a non-profit organization that offers investment opportunities to individuals, companies, associations and public authorities. 

The ‘Waarborgregeling’ gives banks the option of having up to 75% of a loan guaranteed by the government. This guarantee scheme:

• is available to self-employed people, liberal professions, nonprofits, SMEs, large enterprises and foreign projects of companies located in Flanders;
• involves a guarantee amount of up to EUR 1.5 million, with a one-off premium paid by the business;
• enables negotiation between the bank and the business;
• offers flexible conditions for SMEs inconvenienced by public works.

Complementary to the Guarantee Scheme, GIGARANT always involves an amount larger than EUR 1.5 million, covering up to 80% of the underlying funding amounts with a maximum duration of 8 years. This financing scheme:

• is granted to small, medium-sized and large enterprises that are not in difficulty at the time of the guarantee and not active in the fishing or agricultural sectors;
• must be used within Flanders or to finance the activities of a seat of operations in Flanders;
• may not be used to pay remuneration in any way to the shareholders or management (except based on existing market level agreements).

In Flanders, non-bank financing is available to companies in the form of leasing. Here’s what you should know:

• Only officially accredited leasing companies, accredited as guarantee holders and having signed a framework agreement with Waarborgbeheer, can bring undertakings under the guarantee. 
• This funding option excludes sale and lease back constructions, vendor leases and private cars.
• In terms of accounting, two basic forms of leasing exist: on-balance leasing (where the purpose of acquisition by the lessee is essential) and off-balance leasing (where the focus is on the operational provision of an asset).