Key actions by banks directed to legal entities
- Banks in Finland are key sources of financing for companies which offer loans, Capex and working capital facilities. Finnvera guarantees are often used to share risks. Nordic banks have strong solvency to face COVID-19 crisis.
- ECB and FIN-FSA
- ECB has loosened the solvency and liquidity requirements for institutions directly under its supervision. In Finland, these institutions comprise Nordea Bank Plc, OP Group and MuniFin (public sector financing).
- Other financial Finnish entities are supervised by FIN-FSA, who has indicated that ECB measures are available for other credit institutions too. On 17 March FIN-FSA decided to decrease all main solvency requirements by approximately 1.0% with bank variations. By FIN-FSA calculations the measure, in conjunction with other supervision requirements, increases Finnish credit institutions lending capacity by €30 billion.
- The purpose of the actions is to support banks’ credit loss buffers and lending to corporations as well as households in order to mitigate adverse financial effects from the outbreak. FIN-FSA supervise that the decreased solvency requirements and new public aid is channeled to lending and not e.g. for dividends or remuneration. On 27 March FIN-FSA and ECB strongly advised banks to refrain from distributing dividends until Oct20.
- Commercial banks
- The actions give banks the possibility to grant instalment-free periods for SME companies of up to 12 months and/or increase credit limits. The actions depend on bank and by case by case approach.
- The banks will likely utilize Finnvera in its full capacity to share risks.
- Banks may priorities current clients in order to avoid credit losses and therefore potential new clients may face tighter financing policy.
- A challenge is to identify good customers truly affected by the outbreak from customers that were in distress already before.
Key actions by Finnvera
- SMA guarantee – max €150,000 commercial bank loan (max. €120,000 guarantee)
- For limited liability enterprises that have operated for more than three years. Not applicable to farming, M&A activities, construction sector, to acquire premises or purchase vehicles.
- Was originally intended to finance various R&D, capex and working capital needs but has now been extended to include financing of COVID-19 induced immediate cash needs;
- The guarantee is always 80% of total facility ranging €10,000 - €120,000
- First contact is to the enterprise's main commercial bank, who request Finnvera for a guarantee;
- Does not require any guarantees. The applicant and main responsible must be investment grade (guarantee provision range is 0.95%-3.00% pa. depending on rating A – AAA, min rating A).
- Finnvera guarantee – max. €1,000,000 working capital loan (max €800,000 guarantee)
- Originally intended as security for various SME and in certain cases large enterprises financing. Such needs include capex, exports, working capital and M&A activities. Whereas start guarantee package and SME guarantee may be set as security for only promissory notes, Finnvera guarantee can secure also credit limits, revolving facilities, bank guarantees and factoring financing. Forestry and farming as well as property development are excluded, otherwise the industry is not defined.
- Due to COVID-19 the Finnvera guarantee has been increased to 80% and collateral need is waived. Also a "fast-track" procedure has been set for €150,000-€1,000,000 working capital loan facilities. It is vital that the facility is initially negotiated with the bank, who contact Finnvera for the guarantee. The "fast-track" procedure requires min. A-rated customer and profitable business prior to the restrictions due to COVID-19 outbreak. Further, a "fast-track" procedure requires that the loan is a promissory note ranging €150-1,000 thousand, maximum for five years with the first two being free from instalments but otherwise equipped with an instalment program, use of funds is to cover cash needs due to rapid economical rapid downturn, not used to convert existing facilities and that the bank grant installation waivers for existing other facilities.
- Pricing of the guarantee is 2.5% annual commission.
- The timeframe for a "fast-track" procedure is not disclosed but depending on facility size it envisaged to be from few days to a couple of weeks.
- Effectively Finnvera does no own credit assessment for smaller facilities (less than €150,000). For larger ones, Finnvera still assess own credit analysis.
- On the following sections, we describe decided actions for SME and MidCap companies which exists as of today by two entities: Business Finland and ELY (Centers for Economic Development, Transport and the Environment). They are valid for now and Business Finland has also a new COVID-19 initiated loan facility, applicable until the end of 2020.
- However, the facilities have restrictions by Law. For instance, Business Finland is be Law prohibited to finance distress. It is only able to support Development projects and same apply for ELY. The Finnish Government has decided, albeit with several open issues remaining, upon general subsidies without so strict restrictions. If and when this form goes live, the COVID-19 measures taken today by Business Finland and ELY are gradually dissolved.
- The latest on the General Subsidy is described later in the section for Finland.
- From 11 September 2020, financiers can apply for Finnvera guarantee on behalf of the company.
Key actions by Business Finland
- Business Finland offers subsidies and loans for SME and mid cap companies. At the beginning of the pandemic, Business Finland launched COVID-19 programs helping SME’s but since the general support (discussed overleaf) was launched, Business Finland returned to ordinary support programs.
- Key actions by ELY (Centers for Economic Development, Transport and the Environment)
- ELY still support self-employed people without any other employees. Details of this will be disclosed later but apparently the size is approximately €2,000.
- Bu as with Business Finland, other direct COVID-19 related special programs were seized after introducing the general support. ELY is currently operating by their ordinary subsidy guidelines.
Key actions by TESI
- TESI provides private equity type of financing for Finnish SME companies, who have strong growth outlook and market potential. Measures taken:
- Prepared to offer new follow-on equity investments into portfolio companies.
- Readiness to launch new stabilization financing program together with private
- TESI is Governmental agency, providing private equity type of financing for Finnish SME companies, who have strong growth outlook and market potential. COVID-19 measures:
- Will launch on 14 April 2020 a stabilization financing program II (program I was launched in 2008 financial crisis) for the SME sector. The purpose is together with private investors to strengthen companies’ financial positions. The Government directs €150 million into this program.
- The investments range €1.0-10.0 million;
- The Target shall be a notable domestic employer with minimum €10 million in net sales and 50 employees. The Target business must be proven profitable before the crisis with feasible outlook after the crisis.
Key actions by unions (Agreed but not fully funded)
- A 16-point action list was agreed by two of the largest unions, the Industrial Employer and the Industrial Employees. However, this includes certain items that need to be financed, and that part has not yet been approved.
Key actions by Municipalities
- Municipalities support self-aid enterprises by one time €2,000.
- Loan collateral amounting to EUR 1 Billion for bank loans already issued in order to allow for repayment schedule adjustment
- Guarantees for bank financing up to 80%
On 13 May 2020 the Finnish Government decided upon a “General Subsidy I” for entities with substantial drop in volume and sales due to the pandemic restrictions. Following the introduction of the program, the business development aid granted by Business Finland and the ELY were be discontinued on 8 June 2020. Business Finland and ELY continued to support businesses with their ordinary instruments.
The main features of the program were as follows:
- The subsidy is directed to companies suffering of COVID-19 impacts. To be eligible support, an entity’s sector revenue should have declined by at least 10% in April 2020 and an entity revenue should have decreased by at least 30% in April – May 2020 from a comparison period.
- Support was granted on the basis of the company’s fixed costs and payroll costs.
- Companies that have been granted other coronavirus-related financial support were able to apply, but other forms of direct support were deducted from the subsidy amount.
- The application period was until 31 August 2020.
On 29 September 2020 the Government proposed to introduce the second round of the support program. There have been certain amendments proposed, with the basic principles however remaining unchanged. The reintroduction of cost support is currently being discussed by the Finnish Parliament with the aim to reopen an application process in late 2020.
Support for restaurants
- The restaurants and bar businesses that were closed between 4 April and 31 May 2020 received a separate support consisting of two elements: support for job retention and re-employment (€1,000 per employee, subject to certain criteria) and compensation for the restriction of operations the amount of which depended on the change in sales caused by restrictions (maximum amount €500 thousand.