The new financing model proves to be an immediate hit
During its first year, Finnvera’s Start Guarantee attracted applications for 1,600 financing projects. An entrepreneur considers the guarantee convenient for start-ups.
Both banks and entrepreneurs have found Finnvera’s Start Guarantee, which has been in use for a little over a year.
According to Team Leader Leena Waarna, banks have submitted applications for Start Guarantees to Finnvera for 1,600 financing projects.
The bank applies for the Start Guarantee on behalf of the entrepreneur. In other words, the entrepreneur only deals directly with his own bank. Finnvera’s guarantee coverage can be at most 80 %. However, the total sum of Start Guarantees granted to one enterprise may not exceed EUR 80,000.
“The Start Guarantee is also well suited for smaller projects, for instance from 30,000 to 50,000 euros in size. Therefore, entrepreneurs should not be discouraged even if they don’t have proper collateral for the bank,” Waarna says.
She encourages starting entrepreneurs to contact local advisory services first. They have information, for instance, on competition in both the region and the sector involved.
Companies’ initial costs and financing needs vary widely.
A few tens of thousand euros is enough for the initial working capital for example in the service sector, whereas considerably more money is needed for investments in projects involving production.
“Entrepreneurs are generally pretty good at calculating their expenses in advance. In contrast, turnover forecasts are easily over-optimistic. It is expected that turnover will start to accumulate quickly, and payment schedules are drawn up accordingly,” Waarna says.
“Realistic overall calculations and correctly dimensioned credit with its repayment periods help the fledgling entrepreneur to avoid the worst pitfalls,” she continues.
A faster start
Tuure Parkkinen, an entrepreneur from Helsinki, praises the Start Guarantee lavishly.
“The Start Guarantee was unusually easy because the bank filed the application for us. From the entrepreneur’s perspective, there was little red tape. In the end, we decided to withdraw 25,000 euros,” Parkkinen reminisces.
Together with his partners, he founded ResQ Club late last November. Using the digital service developed by the enterprise, consumers receive information on food that is about to go to waste in restaurants, bakeries, cafés and hotels.
The service gives consumers the opportunity to buy food at discounts exceeding even 50 per cent. Restaurants, in turn, can reduce their waste.
Parkkinen says that the founders had little savings when establishing their enterprise.
“Even if we ourselves worked without pay, some expenses are inevitable at the start. Now we were able to kick off more quickly.”
From the very start, ResQ Club’s services have attracted interest among both investors and consumers.
With private individuals and venture capitalists as new investors, the company issued a financing call of over 300,000 euros. At the same time, ResQ Club announced that the service is also being launched in Sweden.
The service has about 20,000 registered users and 150 partner suppliers.
FACT: What’s a Start Guarantee?
- The Start Guarantee is intended for start-ups and enterprises that are no more than three years old. The enterprise must be owned by private individuals.
- The Start Guarantee is particularly well suited for small-scale financing, especially if the entrepreneur has insufficient collateral for the bank.
- Finnvera’s guarantee coverage is at most 80 per cent. The total amount of Start Guarantees granted to an enterprise cannot exceed 80,000 euros, in which case the maximum loan sought from a bank under the Start Guarantee is 100,000 euros.
- For collateral, the principal shareholders lodge special guarantee undertakings that must cover at least 25% of Finnvera’s guarantee sum.
- The enterprise presents the financing application to its own bank. Thereafter, the bank assesses the credibility of the business and checks the calculations and the applicants’ creditworthiness before granting financing. The bank submits the application for the Start Guarantee to Finnvera on behalf of the enterprise.
- The Start Guarantee is intended especially for the working capital and investment needs of start-up enterprises. It cannot be used for financing company acquisitions or purchases of business premises.
- The Start Guarantee may also be one part of the enterprise’s aggregate of loans.
- The maximum repayment period for loans under the Start Guarantee is ten years.
More information about the Start Guarantee is available here.
More financing solutions for setting up a company are found here.
Text: Kimmo Koivikko
