A guarantee or a loan? Tips for enterprises that need working capital

22.09.2020

The focus of Finnvera’s financing is still on guarantees but enterprises can now also apply for a loan directly from Finnvera if financing cannot be arranged with a guarantee. Finnvera is prepared to secure the availability of lending to viable enterprises in all stages of the coronavirus crisis, with the aid of both guarantees and direct loans.

The bank or another provider of financing applies for a guarantee on behalf of the enterprise

In the early stages of the coronavirus crisis, Finnvera concentrated on granting guarantees for loans granted by banks or other providers of financing to enable enterprises to acquire financing faster. The reason behind this was that each enterprise has a provider of financing that knows their clients and is the natural starting point for financing arrangements.

Our instructions remain unchanged: In questions related to financing, contact your bank or another provider of financing as early as possible.

The provider of financing may submit the guarantee application to Finnvera on behalf of your enterprise, or your enterprise can apply for the guarantee. The provider of financing submits an application directly to Finnvera for start-ups’ Start Guarantee, the SME Guarantee intended for enterprises that have been operating for more than three years, and now also for the Finnvera Guarantee. This also includes guarantees in the fast track system when the Start Guarantee or the SME Guarantee are not suitable for the enterprise’s needs.

The fast track procedure applies to a EUR 150,000–1,000,000 working capital loan granted by a bank, in which Finnvera’s guarantee coverage has been increased to 80 per cent and the collateral requirement has been abandoned.

Loan directly from Finnvera if a loan guaranteed by Finnvera is not possible

The focus of financing granted by Finnvera is still on guarantees but enterprises can now also apply for a working capital loan directly from Finnvera if they cannot receive loan financing otherwise and Finnvera therefore cannot grant its financing as a guarantee. The loan is subject to certain terms and conditions, such as that the loan cannot be used to repay the existing receivables of the provider of financing.

The amount of the loan can be EUR 50,000–300,000. The precondition for granting the loan is that the enterprise’s business has been profitable before the coronavirus crisis and that it is considered to have sufficient debt sustainability. The enterprise must have at least one official financial statements and the enterprise’s equity must not be negative. There may not be payment default entries for the enterprise. Larger loans are subject to case-specific consideration.

The loan is granted under the COVID-19 Aid Scheme and must therefore also fulfil the terms and conditions of the scheme. The COVID-19 Aid Scheme will be available until 31 December 2020. Beneficiaries are reported to the EU Commission, which will publish them in the EU’s State Aid Portal.

Loan to strengthen equity

The insufficiency of an enterprise’s equity can lead to a situation, in which providers of financing cannot grant more loan to it. Equity can be strengthened with Finnvera’s Growth Loan. The Growth Loan is a so-called junior loan, fairly comparable to an enterprise’s equity. It improves the enterprise’s chances of receiving external financing.

Flexible payment arrangements?

Since March, Finnvera has agreed on nearly 11,000 payment arrangements, such as instalment-free periods, with enterprises. During the spring, instalment-free periods were granted typically for six months, and the return to normal repayment schedules is now approaching.

If the second wave of the coronavirus pandemic starts accelerating and brings along restrictions, we estimate that financing arrangements will become more difficult especially for those enterprises that would need arrangements for the second time during the crisis. When it comes to the continuation of repayment schedules, clients should contact their bank as early as possible. Finnvera takes a flexible approach towards all arrangement and re-arrangement needs and hopes that the entire financing system follows suit.

Additional information:

About Finnvera's Start Guarantee

About SME Guarantee

About Finnvera Guarantee

Finnvera's loan in the coronavirus situation