Finnvera: The availability of financing has remained good although the coronavirus crisis has complicated business. SMEs’ economic outlook declined drastically

The latest SME barometer survey carries rather a bleak message: due to the coronavirus crisis, balance figures fell clearly in all areas. The crisis has also increased enterprises’ need for financing. According to the barometer, the use of external financing increased by seven percentage points from the previous barometer. Now 32 per cent of enterprises reported that they had resorted to external financing in the past 12 months.

Despite the crisis, the availability of financing has remained at a good level: only 5 per cent of the enterprises reported that they had received a negative decision on their financing application. This is revealed by the SME barometer survey published by the Federation of Finnish Enterprises, Finnvera, and the Ministry of Economic Affairs and Employment. Nearly 5,100 SMEs responded to the survey in June–July.

“The barometer indicates that financing works well despite the quickly deteriorated economic situation. In earlier financial crises, friction in the financial market often initiated the crisis or at least deepened it,” says Timo Lindholm, Chief Economist at Finnvera.

The enterprise category in which the use of external financing has been most common is SMEs that are larger than micro-enterprises and have more than ten employees. However, the use of financing has also increased in smaller enterprises: every fourth of them acquired bank or other financing during the past year.

The difficulties caused by the coronavirus crisis can be seen in the doubling of the share of SMEs that have applied for working capital financing, when compared to the last barometer. However, it is positive that business growth and development projects are the weightiest reasons for applying for financing. A total of 39 per cent of SMEs intend to apply for financing for machine and equipment investments, nearly 30 per cent for development projects, and 23 per cent for growth or internationalisation.

Financing granted by Finnvera doubled during the first half of the year

The increase in the demand for external financing during the first half of the year could be seen very clearly in the figures of Finnvera’s half-year report. Demand for Finnvera’s SME financing rose significantly in January–June. EUR 926 million was issued in loans and guarantees to Finnish businesses, which was 115 per cent more than during the corresponding period last year.

“Well-functioning public corporate financing is a significant element in industrial policy, and its significance is further emphasised in current circumstances,” notes Lindholm.

Finnvera is prepared to secure the availability of financing to viable enterprises in all stages of the crisis. It can be expected that the general corporate financing situation becomes more difficult in the near future, even during the autumn. Although the focus of Finnvera’s financing is still on guarantees, enterprises can now also apply for a loan directly from Finnvera if the arrangement of financing requires that.

The near future seems grey

The balance figure describing SMEs’ economic outlook fell to -11 as one third of the SMEs estimated that the economic situation will decline further during the next 12 months. In industry, the outlook for the next 12 months is slightly weaker than in other sectors. The second phase of the coronavirus crisis can be seen especially in that the expectations deteriorated most in larger SMEs that employ more than 50 people.

“This is a sign that forecasts that the coronavirus crisis will hit larger industrial enterprises involved in export trade harder than other enterprises,” estimates Lindholm. However, it is positive that the willingness to make investments and develop operations is higher in industry than in other sectors. Industrial SMEs also estimate that they will be able to maintain their profitability better than enterprises in other sectors.

Further information:

Timo Lindholm, Chief Economist, Finnvera plc, tel. +358 29 460 2910

Read more about the SME barometer survey on the website of the Federation of Finnish Enterprises.