Proposal to raise Finnvera’s ceilings on outstanding commitments
The Cabinet Committee on Economic Policy has decided in favour of raising Finnvera’s ceilings on outstanding commitments, to ease the financing of companies. In accordance with the proposal of the Ministry of Employment and the Economy, the ceiling on outstanding commitments for export financing would be raised from EUR 7.9 billion to EUR 10 billion. Last week, the Cabinet Committee on Economic Policy decided to raise Finnvera’s ceiling on outstanding commitments for domestic financing from the current EUR 2.6 billion to EUR 3.2 billion. The increases in the ceilings require a legislative amendment; the intention is to present a Bill to the Finnish Parliament in the near future.
By increasing the ceilings on outstanding commitments, the State strives to ensure Finnvera’s possibilities during the financial crisis to provide more financing for business deemed to be profitable. The financial market crisis increases demand for financing from Finnvera, because banks are less willing to take risks.
EUR 1.2 billion in refinancing to secure exports
Additionally, in line with the proposal of the Ministry of Employment and the Economy, effort is made to ease the liquidity problem facing export financiers by means of a refinancing model where Finnvera’s subsidiary, Finnish Export Credit Ltd, will refinance the credit given by a Finnish or foreign bank in cases where the project cannot otherwise obtain financing on reasonable terms.
At this stage the Ministry proposes that a maximum of EUR 1.2 billion be reserved for refinancing of export projects. The funds for financing will be acquired from the market; the State Treasury will handle the arrangements.
The aim of these arrangements is to secure the continuity of financing for exports during the financial crisis, and to ensure the competitiveness of Finnish exporters in relation to export companies from other countries. Continuation of this arrangement, and its adequacy, will be reviewed, at the latest, at the end of May 2009.
“This is not a question of rekindling the operations of the ‘old’ Finnish Export Credit; rather, it means that our operations are expanding to the refinancing of export credits. The arrangement does not ensure the functioning of international financial markets, nor can any one national economy. For its part, this arrangement will certainly ease the needs of Finnish capital good exporters to provide financing for their customers,” says Topi Vesteri, Executive Vice President.
In export financing, credit risks associated with export trade are assessed separately for each project, and guarantee decisions are made, as before, in line with Finnvera’s guarantee policy.
Ceiling on outstanding commitments in domestic financing to increase by EUR 600 million
Finnvera estimates that domestic demand for financing, too, will increase next year. A rise in the ceiling on outstanding commitments will make it possible to provide financing for a greater number of projects deemed to be profitable.
According to the proposal, Finnvera’s subsidiaries Aloitusrahasto Vera Oy and Veraventure Oy will receive a capital infusion of EUR 30 million. Aloitusrahasto Vera makes capital investments in companies that have operated less than two years, while Veraventure makes investments in regional venture capital funds.
Finnvera’s financing is always based on a corporate analysis that helps determine whether the enterprise has the prerequisites for profitable business in the near future. In practice, Finnvera always shares the risk with other financiers. In Finland, Finnvera can provide financing for SMEs in all sectors except agriculture, forestry and the building developer’s business.
“As before, we will act in line with our financing criteria. Even in difficult situations, risk-sharing means that additional input can be expected from owners and other financiers,” says Managing Director Pauli Heikkilä.
Additional information:
Pauli Heikkilä, Managing Director, tel. +358 20 460 7321 or +358 400 429 210
Topi Vesteri, Executive Vice President, tel. +358 20 460 7238 or +358 400 702 002 (export financing)
Veijo Ojala, Executive Vice President, tel. +358 20 460 7405 or +358 400 672 401 (domestic financing)
Leena Jaakkola, Senior Vice President, Communications and Marketing, tel. +358 20 460 7232 or +358 40 352 9332
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Finnvera plc
Finnvera plc is a specialised financing company whose services supplement the financial market. It is owned by the State of Finland. Through its financing instruments, Finnvera promotes enterprise, regional development and the exports of Finnish companies.
Finnvera provides domestic loans and guarantees for SMEs, and export credit guarantees for exporters and for financiers of exports. The company participates in the financing of an undertaking based on a profitable business idea when the risks associated with the financing prevent the undertaking from obtaining financing from commercial financiers.
A fee is charged for financing provided by Finnvera. The price of financing depends on risks and on the security available.
Finnvera can provide financing for SMEs operating in Finland in all sectors with the exception of agriculture, forestry and the building developer’s business. No restrictions are placed on the business sector in export financing.
Finnvera shares risks with other financiers and participates only in projects that it deems profitable. Private financing plays the main role in projects; Finnvera acts generally as a co-financier.
