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Competitive RegionsShaping best practice

Finnvera’s soft loan schemes for SMEs

Sheffield 9-10 October

Pauli TiainenFinnvera plc

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Finnvera plc

A specialized financing company owned by the state of Finland and operating in the whole of Finland– grants risk financing to SMEs (e.g. loans and guarantees)– promotes the exports and internationalization of enterprises

Key figures– 25 700 clients– two head offices and 16 regional offices – personnel of about 400– share capital € 188 million– balance sheet total € 1, 53 billion– total liabilities € 5,7 billion

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Objectives of Finnvera’s ERDF- co-financing

Diversification of financing instruments used in the ERDF-cofinancing in Finland– reduction of direct subsidies

Intensification of the effects of the Objective 1 and 2 programmes on the development of SMEs– new jobs– new enterprises– new investments– overall development of SMEs

Increase in risk-taking especially in the Objective 1 areas

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Finnvera’s ERDF-cofinanced schemes and the ERDF’s participation

Micro-financing scheme– micro-enterprise loans– women entrepreneur loans

Entrepreneur loan scheme– entrepreneur loans

Growth financing scheme– investment and working capital loans

The ERDF-cofinancing is used for– interest subsidies (all schemes) and – compensation for credit losses (growth financing scheme)

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Interest subsidies 1

The Objective 1 areas– micro-financing and entrepreneur loan schemes (interest subsidies

are paid throughout the loan period)• both the ERDF and the state of Finland 2,5%

– investment and working capital loans (interest subsidies are paid in the first two years)

• national assisted area/category 1both the ERDF and the state of Finland 2%

• national assisted area/category 2both the ERDF and the state of Finland 1,8%

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Interest subsidies 2

The Objective 2 areas and Urban areas– micro-financing and entrepreneur loan schemes (interest subsidies

are paid throughout the loan period)• the ERDF 2% and the state of Finland 3%

(these schemes are not used in the Urban areas)– investment and working capital loans (interest subsidies are paid in

the first two years)• national assisted area/category 3 or non- assisted

the ERDF 0,7% and the state of Finland 1,0%• national assisted area/category 2

the ERDF 1,5% and the state of Finland 2,1%

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Interest subsidies 3 Intermediation of interest subsidies

The phasing-out areas (Transitional support)– micro- financing and entrepreneur loan schemes (interest

subsidies are paid throughout the loan period)• the ERDF 2% and the state of Finland 3%

– growth financing scheme is not used in these areas Finnvera intermediates the above-mentioned

interest subsidies to the enterprises by granting the loans at decreased interest rates in which the interest subsidies are fully taken into account

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An example of an investment and working capital loan/Objective 1 area

Investments € 1million and working capital € 0,5 million (total capital requirement € 1,5 million)

Financing – Finnvera € 0,5 million– Bank € 0,4 million– TE- centre (cash grant) € 0,2 million– Own financing € 0,4 million

Finnvera’s loan (maturity 6 years, two years without amortization)– rate of interest (first two years) EB6+ 0,9+2,2%- (2%+2%)– rate of interest (after two years) EB6+0,9+2,2%– subsidy element calculated as a grant € 24 000 (2,4% of the investment)

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Compensation for credit losses

Compensation for Finnvera’s credit losses only concerns the growth financing scheme

Compensation in the Objective 1 areas – the ERDF 40%– the state of Finland 40%– (Finnvera 20%)

Compensation in the Objective 2 areas– the ERDF 27%– the state of Finland 40%– (Finnvera 33%)

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Some key figures concerning Finnvera’s ERDF-cofinanced loans granted in the

period 3.4.2001- 31.8.2003 Loans granted and the share the ERDF- and state

financing bound to interest subsidies and to compensation for credit losses (million €) Loans Financing bound

ERDF State Total Invest.+ working capital loans 181,3 11,0 12,0 23,0 Micro-loans 29,4 2,3 2,9 5,2 Women entrepreneur loans 17,5 1,4 1,7 3,1 Entrepreneur loans 15,6 2,6 3,3 5,9 Total 243,8 17,3 19,9 37,2

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Some indicators concerning Finnvera’s ERDF-cofinanced loans granted

The figures concern both the Objective 1 and 2 programmes (period 03.04.2001- 31.08.2003)– New jobs (total) 6 599– New jobs for women 2 493– Safeguarded jobs (total)2 814– Safeguarded jobs for women 782– New enterprises (total) 1 744– New enterprises established by women 766 – Equal opportunities projects 1 271

– ERDF- and state- cofinancing (€)/job 5 640