Good practice:

Finnvera working capital business loans and loan guarantees available to SMEs

Finnvera is a special financier owned by the State and the Export Credit Agency (ECA), Finland's official export guarantee agency. Finnvera working capital business loans and loan guarantees are available to SMEs, including crafts companies.

Finnvera makes it easier for companies including craft SMEs to qualify for bank loans of working capital by providing loan guarantee protection. SMEs may not otherwise qualify for these loans because they lack collateral or sufficient income or assets. Working capital can be used for purposes such as increasing inventory or receivables.

Many SMEs, and especially craft sector SMEs, are struggling because of the COVID-19 pandemic. Finnvera has adapted its Working Capital Loan Guarantee in response to these challenges.
1. The initial guarantee is intended for companies that have been in business for a maximum of three years. In the initial guarantee, Finnvera's guarantee share does not exceed 80%.
2. The SME guarantee is intended for companies that have been in business for more than three years and can guarantee a loan of up to €150,000 from the bank.
3. The Finnvera guarantee can also be used to finance the increased working capital needs of companies due to the Coronavirus, if Finnvera's initial guarantee or SME guarantee is not suitable for the company's needs.

- Applicant companies may receive de minimis deferred State aid support from different countries or municipalities up to max €200,000 over 3 years
- Coronavirus support, temporary State aid framework
- 369 Finnvera employees
- Domestic financing 3.2 billion loans can be as small as €10,000

- Finnvera is State-owned and is, as required, profitable from its own activities.
- Credit ratings: Fitch AA+; Moody's Aa1
- Overseas 3.2 billion € domestic financing; 21.5 billion € export guarantee and special guarantee activities
- Serves 26,319 customers
- SME and midcap export credit guarantees and export guarantees: EUR 21,971 million (EUR 22,408 million)
- CEO Pauli Heikkilä, 2021 ½ year report: “The financing system has worked well in Finland throughout the crisis.”

Loan defaults are a risk. Due to the Coronavirus pandemic, 1 July 2020, Finnvera gave a profit warning, reducing its outlook for 2020 and estimated Finnvera Group would show a loss. Overall the year was stable.

Other countries could run similar programs. On the federal level, such a program helps to stabilize the national economy by making it easier for craft SMEs and other businesses to borrow funds for working capital. In Finland, the default rates have not been high and the program is successful overall. The success of a similar program would probably also need a high rate of loan repayment.

This kind of program is especially helpful for small craft businesses which may operate with small margins and very limited capital. It can make the difference between qualifying for a loan and being able to continue operations or not. Loans can be as small as EUR 10,000, making it a viable option for many SMEs.