Running a small business in the Netherlands: key findings
The Netherlands is often seen as a front-runner when it comes to digitalisation, environmental care and culture. People who have visited are likely to remember the beautiful canals, the vast number of smaller cafés and restaurants and their emphasis on local produce, as well as how many people are travelling by bike. Perhaps this has something to do with its geographical circumstances that has imprinted an eco-aware mindset in the Dutch people, considering that 17% of the country is below sea level. Schiphol Airport, for instance, is the world’s lowest major commercial airport, sitting at 3.4 meter below sea level.
The Netherlands is, according to the Heritage Foundation, ranked as #14 in the world in the Business Freedom Index. For those that haven’t read our previous posts on this topic, the ranking basically reviews the efficiency of government regulation of business. This is a good score, but much like Luxembourg, the Heritage Foundation finds that the largest obstacles to furthering economic freedom relates to the government’s spending even if the Netherlands has managed to cut its budget deficits in recent years.
Source: The Heritage Foundation, Business Freedom Index There are a number of aspects in which the Netherlands stands out compared to the rest of the EU and one example of this is its ranking in the EU when it comes to entrepreneurial activity.
Dutch people see entrepreneurship as a desirable career choice to a much larger extent compared to other people in the EU. This is, the SBA Fact Sheet 2019 concludes, partially due to early education that seeks to develop entrepreneurial ambitions among its population, starting as early as primary and secondary education. The number of companies that are being created by minors have also increased rapidly and increased by 30% between 2017 and 2018.
Another interesting point is the responsiveness of its administration procedures for the creation of a company, where the country requires no paid-in minimum capital and offers setting up a company in 1 day with four procedures, which is one of the fastest processes in the EU as a whole.
The cost of enforcing contracts represents, on average, around 23% of the value of the contract itself, which is slightly more expensive than the EU average.
In the area of accessing finance, the Netherlands stands out when it comes to access to business angel funding, where they outperform the rest of the EU by far. But the key issue for small businesses in the Netherlands that are seeking access to working capital liquidity is the relative cost of small business loans compared to larger loans, where the Netherlands has the third highest cost of borrowing! In order to tackle the above, the Dutch have implemented a number of credit-related initiatives that seek to facilitate access to finance for small businesses. One example of this is the ‘Qredits’ initiative that was introduced in 2015, which is an organisation that provides loans to hospitality, retail and business services sector up to a maximum amount of €250,000. Another noteworthy example, that goes to show the difficulties that Dutch small businesses experience, is the Borgstellingskrediet MKB, which is an initiative that seeks to tackle the high percentage of businesses having their loan applications rejected. All in all, the country has a very good environment to start or run a small business. There are lots of initiatives that seek to encourage entrepreneurship and make life easier for small business owners. We believe that making access to finance broadly available will continue to boost the country’s general developments in all SME-related areas. The Netherlands is definitely one of Europe’s small business superpowers!