What will you do with piggy banks in the family?

Almost immediately after the onset of the economic crisis in 2008, we all continued to fill our piggy banks. Dutch households currently have about 340 billion euros in savings outstanding with Dutch-based banks, De Nederlandse Bank reported in early February.

In 2016, the stock of savings increased by 5,3 billion euros. Households saved a net amount of 1,8 billion in the past year. The remainder of the increase in savings was caused by the credited interest.

The crisis and subsequent developments have disrupted the balances in the world and in any case also those in the financial field. Financial uncertainty scares everyone and less is spent, more is saved, so that companies grow less rapidly. This is a well-known cake in itself. I find it strange that the current low savings interest apparently has little influence on this.

If we list the most important developments in agriculture and horticulture, we see issues such as high demand for good soil, economies of scale and more price fluctuations. Perhaps most striking is that two-thirds of business owners fall into the "highly experienced" category because they are over 50 years old. All this together leads to the conclusion that a further increasing capital requirement will arise in the coming years, which we previously estimated at 30 billion. In daily practice I speak with entrepreneurs who are directly involved in these matters at their own company. Real entrepreneurs who 'continue where others stop'. They continue to grow and develop steadily that requires capital.

The question is where that capital will come from. By far the largest part comes from our own savings and from the banks. But in recent years we have also seen that the latter category no longer wants to go 100 percent for that and expects more own contribution and/or that of other lenders.

In earlier times, entrepreneurs often borrowed from parents, uncles and aunts or other good acquaintances who had the necessary euros at their disposal. Somehow that is no longer of this time. That is of course a missed opportunity because all uncles and aunts together, society or 'the crowd' is filled with overflowing piggy banks. Pigs with a negative feed conversion rate, because they are getting leaner because the interest rate is currently lower than inflation.

The demand for capital and low interest rates on savings are pushing society more and more towards crowdfunding. In total, Dutch entrepreneurs raised around 2016 million euros in 170 through crowdfunding, an alternative form of financing in which lenders have direct contact with a company. Although this is still very little macroeconomically, we should at the same time realize that it is growing faster and faster. Namely from 14 million in 2012 to the aforementioned 170 million euros in 2016.

Successful cases have been realized, but as a whole, crowdfunding is still not gaining much traction in the agricultural sector. That is a missed opportunity for everyone. So… What are you going to do with the piggy banks in the family or further away in the crowd?

Peter Pals

Peter Pals is an entrepreneur at Farmers Funding & Advies and grew up on a farm. From his farming heart, he has decided to build up a business for business, financial and tax advice for agricultural entrepreneurs.

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