Towards new growth with Finnvera’s counter-cyclical financing
Finnvera can grant counter-cyclical financing to companies until the end of next year. Demand for counter-cyclical financing has levelled off this year after the record-high demand in 2009. Owing to the expectant atmosphere in the economy, the need for financing for investments and growth among enterprises has remained low. As economic growth gains momentum, the need for financing will also pick up.
“Demand for financing is still cautious, but when financing is needed for working capital and investments, counter-cyclical financing is one of the options we can offer,” says Executive Vice President Veijo Ojala of Finnvera.
If enterprises have encountered liquidity or profitability problems because of the economic recession, Finnvera can grant them Counter-cyclical Loans and Guarantees for working capital. A precondition is that the enterprise has the potential for profitable business after the recession.
Counter-cyclical financing secures enterprises’ working capital and supports their own adaptation measures. Another precondition for receiving counter-cyclical financing is that the enterprise’s other financiers are ready to reschedule their receivables or to grant additional financing. This helps ensure enterprises’ overall financing and its continuity.
“Counter-cyclical financing has been highly useful during the current recession. It has helped avoid unnecessary bankruptcies and companies have been able to carry out their survival plans. We are now tuning counter-cyclical financing for an upturn in the economy in order to speed up companies’ investments and growth,” Veijo Ojala explains.
“For the most part, counter-cyclical financing has been used to meet working capital needs. Unfortunately the share of investments has so far been low. The range of business sectors has been fairly varied. The metals and engineering industry has accounted for a little over one third of the total, and a typical target company has been a machine shop serving as a subcontractor or supplier to other companies. The wood products industry has also accounted for a considerable percentage of the financing, and sawmills are another typical customer group,” Ojala describes.
On average, Counter-cyclical Loans and Guarantees have been clearly bigger than during the recession of the early 1990s, because now counter-cyclical financing has been granted not only to SMEs but also to larger enterprises.
Finnvera’s Counter-cyclical Loans and Guarantees were introduced at the right time in March 2009, when the financial and economic crisis was at its worst. The total amount of counter-cyclical financing granted by the end of May this year is EUR 215 million, which has helped over 600 companies to overcome financial difficulties caused by the recession.
In total, Finnvera is authorised to grant EUR 900 million in counter-cyclical financing between 2009 and 2011.
Conditions for Counter-cyclical Loans and Guarantees
Counter-cyclical Loans and Guarantees are generally intended for enterprises with at most 1,000 employees that have difficulties in obtaining financing because of the current economic situation. For special reasons, counter-cyclical financing can also be granted to companies with more than 1,000 employees. A precondition for the financing is that the company’s other financiers are also willing to reschedule their receivables.
