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Loan notes

The use of loan notes in property and industry
Versatile instrument for professional investors

Loan notes: the benefits

Real estate financing

A growing number of investors see investing in mortgage loans as an essential part of a safe investment strategy. The success of peer-2-peer funders such as Mogelijk (NL) and Fiduciam (UK) is testament to this. Meanwhile, crowd funders such as Collin (NL) and Horeca Crowdfunding (NL) are also active in this sector, allowing relatively small investors to participate in mortgage-backed loans.

Loan Notes

As an investor you sometimes just want more diversification, less hassle and a certain degree of marketability of your loans. You can achieve this with loan notes (“schuldbrief” in Dutch, “Schuldschein” in German). Where providing mortgage loans can be labour and knowledge intensive, a professional credit institution will do that for you, for a fee. It provides the investor with a diversified portfolio of mortgage loans that is packaged in a loan note programme. The programme offers the possibility to issue new debt securities from time to time with the same documentation. This saves the investor time and money. The professional manager not only looks for the opportunities that meet the requirement and eligibility criteria in the note programme, he also takes care of the management, such as payment of interest and amortisation. Usually (depending on the structure) the investor receives the financial result of the loan portfolio after deduction of costs.

Loan notes can be divided into equal denominations (convenient when trading) or in certificates registered to an investor. The mortgage loans financed by the loan note therefore offer security. But that does not automatically apply to the loan notes themselves. The investor should therefore study the notes carefully.

Large market

Loan notes are financially very similar to bonds: they are both negotiable, listed on a stock exchange and with an interest rate, the coupon. In the EU, however, bonds are subject to stricter regulation, making smaller issues too costly for investors.

Loan notes can be issued to a limited group of professional investors, so that the so-called prospectus requirement does not apply. In this link you can read how Dutch regulator AFM views such private placements.

In addition, any company or financial institution can issue loan notes. That is a huge advantage for both investor and issuer. The market for loan notes and Schuldschein is not small, however. In 2019, UniCredit estimated the market size in Europe at € 25 billion in new notes per year with some 150 issuing companies and institutions. In the Netherlands, network operator Tennet, for example, issued a € 500 million Schuldschein. Loan note programmes are often between € 25m and € 250m.

Family offices, HNW individuals, asset managers and institutional investors have extensive access to this market.


There are applications in many sectors and not only in real estate. In general, this form of financing is mainly for companies and institutions that have many fixed assets with a stable cash flow. Think of the financing of industrial installations or the rental thereof, infrastructure, offshore and port installations, but also in healthcare and communication networks. For example, our relationship AMP Clean Energy has issued a £ 100m loan note with an 8% coupon with a maturity date of 2036. This loan has been used to finance large-scale wood-burning stoves and generators to support the UK's electricity network.


For the issuer, the loan note can offer more financial scope than bank financing. It also offers a diversification of funding sources on the balance sheet and a healthy duration profile.

Investors often prefer not to be directly involved in the build-up of the assets on the balance sheet, documentation and management of the issuer. Loan notes leave this responsibility with the issuer. In addition, being able to include the debt securities in a securities depository with a quotation is an advantage for many investors.

Direct market operations between investor and issuer support the correct pricing of the loan, which is typically between 5% and 8% per year. Saving the costs of fund managers benefits both the issuer and the investor.

If you have any questions about this form of financing, please contact us.

Issues normally range between €25m and €250m