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Transfer of ownership

Are you thinking about buying or selling a company? Transfer of ownership raises questions for both buyer and seller. What’s the value of your company? What should you take into account when buying a company and where do you get the financing needed? We have compiled information about these issues in one place.

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We provide financing for the start, growth and internationalisation of enterprises and for protection against export risks.

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Start Guarantee for the start-up

Start Guarantee is intended for newly launched enterprises that are owned by private individuals and meet the SME definition applied by the EU. The bank will submit an online application for a Start Guarantee to Finnvera on behalf of the enterprise.

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Applying for growth financing

Finnvera's online service provides a secure and easy way for submitting financing applications. Log in to the service using your personal banking ID or your Katso ID.

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Press Releases
Trade relations between Finland and Iran to strengthen

Finland and Iran have signed a Memorandum of Understanding, which is the first step in efforts to facilitate the financing of Finnish companies’ export projects.For Finland, the memorandum was signed by Executive Vice President Jussi Haarasilta of Finnvera. The signing ceremony took place during the visit to Iran by the President of the Republic Sauli Niinistö.Haarasilta anticipates that Finnish companies will gradually have better export opportunities to Iran.“Following the dismantling of economic sanctions, Finnvera has already provided guarantees for trade with Iran. For us to be able to contribute to the financing of increasingly large business deals, both Finland and Iran must show strong commitment. The signing of the Memorandum of Understanding is an important step on this path. For this we are glad. Finnvera’s mission is to promote the exports of both small and large Finnish enterprises and to secure a competitive export financing system.”Haarasilta sees export opportunities for Finnish companies in several industries.“Cleantech, the bioeconomy and mining technology are good examples of industries important to Iranians where Finns have solid expertise. Infrastructure projects also have potential for Finland,” he assesses.Haarasilta points out, however, that monetary transactions with Iran still involve challenges.“An export company planning to do business in Iran should contact the bank and Finnvera as early as possible,” he stresses.Additional information: Jussi Haarasilta, tel. +358 29 460 2601Photo: The Memorandum of Understanding was signed in Tehran by Jussi Haarasilta (Finnvera) and Mohammad Khazaee (Organization for Investment, Economic and Technical Assistance of Iran). Photo credit: Juhani Kandell/Office of the President of the Republic

SMEs should secure their sales receivables more effectively

Credit insurance and letters of credit help avert unnecessary credit losses, especially on exotic export markets.Most SMEs engaged in exports have rather weak protection against potential credit losses.According to the latest SME Barometer Survey, 15 per cent of export companies use credit insurance to secure their sales receivables. Nine per cent of respondents relied on letters of credit with payment time, while the same percentage used letters of credit at sight.Respondents were allowed to tick more than one answer to questions about financial instruments in export trade. Nearly 6,000 SMEs responded to the barometer published in mid-September. One in five engaged in exports or business abroad. Eeva-Maija Pietikäinen, Head of Trade Finance at Finnvera, recommends that SMEs secure their sales receivables, especially in what are known as exotic countries.“Credit insurance is the simplest means of protection and particularly well suited to continuous, short-term trading. We are also able to provide one-off policies, that is, insurance for a single transaction – something very important for small actors,” Pietikäinen says.Finnvera can grant credit insurance only for countries that are not encompassed by the EU rules on State subsidies.The insurance also includes a self-risk portion of ten per cent and the receivables must be uncontested.“The company can apply for compensation from Finnvera when the payment is 90 days overdue,” Pietikäinen explains.Dozens of destinationsA letter of credit is also suitable for protecting companies in short-term transactions. In a letter of credit, the buyer-customer’s bank undertakes in writing to pay the purchase price to the seller.Pietikäinen sees it as a challenge that some countries do not necessarily have a bank that could assume the responsibility for a letter of credit.“One answer is to use pre-payment, which means that at least some of the purchase price is paid upfront. This procedure can be applied, in particular, in the most exotic countries,” Pietikäinen says.Finnvera has commitments in 90 countries, half of which are classified as exotic.Raija Rissanen, Vice President, Country and Bank Risks, at Finnvera, bases her definition of an exotic country on distance, culture and differences in operating environment. The most exotic destinations where Finnish companies export their products backed by Finnvera’s guarantees include Burkina Faso, Trinidad & Tobago, and Malawi.Besides countries in Africa and South and Central America, the list contains countries in Asia and the Middle East.“Most of our commitments concern buyer credits. This means that the credit is granted directly to the Finnish exporter’s buyer-customer abroad. The bank provides the financing and Finnvera shares the risk with the bank. Such credits are often worth over a hundred million euros. Credit insurance and letters of credit are typically used for smaller transactions,” Rissanen explains.FACT: Protection mechanisms for SMEs It pays for SMEs to use secured payment terms when doing business, or to protect their sales receivables, in order to avoid credit losses. The most common protection mechanisms are credit insurance, letters of credit and the Bill of Exchange Guarantee. Credit insurance: Finnvera grants credit insurance directly to the export company. The exporter signs an agreement with Finnvera. The insurance is suited to continuous, short-term trading.EU legislation prohibits Finnvera from granting credit insurance for exports to European countries and a few countries outside Europe. See the list here.If the risks are realised, the insurance includes a self-risk portion of ten per cent. The company can seek compensation after a payment delay of 90 days provided that the claim is uncontested.Credit insurance also suits small transactions: For example, Finnvera has credit limits of EUR 10,000.Letter of credit: A letter of credit means that the buyer-customer’s bank undertakes in writing to pay the purchase price to the seller, i.e. the bank issues the letter of credit. Similarly, the seller has an agreement with its own bank, which confirms the letter of credit. The bank, in turn, can share the risk associated with a foreign bank with Finnvera by applying for Finnvera’s Letter of Credit Guarantee. In all cases, the exporter does not necessarily know that a Letter of Credit Guarantee has been used.Bill of Exchange Guarantee: A Bill of Exchange Guarantee is ideal for fairly small capital goods transactions and continuous exports.The bill of exchange serves both the exporter and the buyer because the exporter is paid in cash while the buyer is given payment time. Finnvera’s Bill of Exchange Guarantee, in turn, protects the bank from any credit losses that might arise.The exporter applies for the guarantee from Finnvera and submits credit data and financial statements on both the buyer and the guarantor, if any, over the past three to four years.It is essential that the financing is planned well in advance before the export transaction. In this way it is possible to select the payment method that suits each deal.Read more about the Credit Risk Guarantee and the Export Receivables GuaranteeAlso, read more about the Bill of Exchange GuaranteeText: Kimmo Koivikko

Environmental impact assessment is an important part of export financing

A review of environmental risks also benefits Finnish export enterprises.Finnvera conducts an environmental review of all export projects undertaken by Finnish enterprises where the financial institution’s liabilities exceed EUR 10 million and the repayment period of the loan is at least two years.The recommendations have come from the OECD, and all OECD export credit agencies comply with them.When conducting an environmental review, Finnvera’s experts strive to ensure that the foreign investor adheres to the host country’s local legislation and meets international standards. The investor bears the principal responsibility for the background study. According to Lauri Etelämäki, Environmental Adviser at Finnvera, a review of environmental risks is standard practice and, at the same time, an advantage to Finnish export enterprises as it helps to avoid unnecessary damage to reputation.“Exporters are helpful and give us information about the investment. Sensitive areas involving, for instance, poor population groups or endangered plant or animal species, may exist anywhere in the world,” Etelämäki says.An environmental review encompasses the whole project even when export financing applies only to an individual delivery of equipment.Virve Tulenheimo, Finnvera’s second Environmental Adviser, emphasises that on the whole, an investment is not turned down because of environmental assessment.“The financier has the right to set terms for the credit agreement. Projects are so large that the investor usually wants to get things right,” Tulenheimo points out.Four different categoriesThere are four categories for environmental assessment: Categories A, B, C and non-project.Finnvera receives a few Category A projects per year. Category A means that the investment may involve significant environmental and social risks in the host country.“Examples are pulp mill projects, power plants and mines established abroad. In general, Finnish companies deliver larger sets of equipment for mills and plants,” Tulenheimo explains.She says that it takes months to assess a Category A project.-    “We also make an effort to visit the project site. The final guarantee decision won’t be made until afterwards,” says Tulenheimo.The small number of Category A environmental reviews indicates that Finnish companies have not gained access to large international industry investments. As a rule, companies use export credit guarantees as protection against potential credit losses.“It has been quieter in recent years. On the other hand, projects are increasingly massive. Ships and oil rigs have been excluded from the review, but we plan to include them in the future,” Etelämäki explains.The second highest environmental category, or Category B, includes, among others, power plants of less than 140 megawatts. Hospitals and mobile phone manufacturing plants are examples of Category C. Finnvera conducts 5 to 10 reviews for Category B per year and dozens of reviews for Category C.“Category B is the most difficult to assess, because the background materials are diverse. Projects in Category C have minor environmental impacts and don’t require background studies,” says Tulenheimo.The fourth environmental category, non-project, has a misleading name. It generally consists of replacement investments.Text: Kimmo KoivikkoFACT: What classification? By using export credit guarantees, exporters and providers of financing for exports usually want to protect themselves against credit losses that may arise when a foreign customer is granted payment time. If needed, it is also easier to arrange financing for a foreign customer to purchase the product if Finnvera covers some of the credit risks Finnvera grants guarantees for countries with adequate credit standing and assesses the creditworthiness of buyers and guarantors If Finnvera’s liabilities for guarantees exceed EUR 10 million or the loan repayment period is at least two years, the project always undergoes an environmental and social impact review In general, Finnvera’s project review encompasses the whole project even when export financing is granted, for instance, for an individual delivery of equipment The owner of the project company or the main supplier for the project is responsible for ensuring that the background studies are made or commissioned. The applicant for export financing is responsible for supplying the information to Finnvera Projects are divided into four categories: A, B, C and non-project Categories A and B: The applicant must provide Finnvera with a report of the assessment of environmental and social impacts. In Category A, impacts are assessed more broadly C and non-project: No background studies are needed A prerequisite for granting financing for Category A projects is that the information on environmental and social impacts is published 30 days before Finnvera signs the agreement on export financing. The relevant parties are asked to give their consent for publication. Read more about export credit guarantees.

Press Releases
Companies’ perceptions of the availability of financing at a low level – financing on offer for profitable projects

The number of growth-oriented SMEs has increased since last spring, and the number of enterprises with a strong desire to grow has already reached the level that prevailed before the-financial crisis. Yet problems exist in the application for financing.The positive trend observed already last spring has continued and among SMEs, economic expectations for the near future are considerably more optimistic than before. The same trend is also visible in growth orientation: 11 per cent of enterprises already say that they have a strong desire to grow while 39 per cent seek growth according to their possibilities.Internationalisation is seen as the key avenue for growth. The number of SMEs with a strong desire to grow has already reached the level that prevailed before the financial crisis.The availability of external financing has not changed. Slightly more SMEs than before plan to apply for financing within the next year. On the other hand, one in ten respondents reported that they would have needed financing during the past 12 months but had not applied for it. Nor has the will to apply for internationalisation financing risen at the same rate as growth orientation.“About 80 per cent of enterprises that had applied for financing said that the terms or availability of financing had no negative impact on the implementation of projects. Since as many as one in ten do not apply for financing because they assume that availability, in particular, is poor, we must communicate to SMEs ever more clearly that financing is indeed available for profitable projects,” says Katja Keitaanniemi, Executive Vice President, SMEs at Finnvera.However, a positive signal of the functioning of the financial market is that 46 per cent of the enterprises that had not applied for financing – despite their needs – reported that they had in any case implemented their project according to plans.Expectations for exports and investments on the riseThe respondents to the SME Barometer Survey also have positive expectations for exports, and exports are assumed to increase steeply in all sectors. Financing is now sought for investments slightly more often than before, while the number of applications for working capital has decreased.The Federation of Finnish Enterprises, Finnvera and the Ministry of Employment and the Economy jointly conduct an SME Barometer Survey twice a year. The goal is to study the operations and economic environment of small and medium-sized enterprises. The barometer for autumn 2016 is based on responses from over 6,000 SMEs.SME Survey on The Federation of Finnish Enterprises websiteAdditional information:Katja Keitaanniemi, Executive Vice President, SMEs, tel. +358 29 460 2888Jonna Myllykangas, Communications Officer, tel. +358 29 460 2740

Press Releases
Finnvera to provide financing for a large biomass plant in the UK

The world’s largest power plant fuelled solely by biomass will be built near the town of Middlesborough, England. The circulating fluidised bed boiler and the flue gas cleaning system are delivered by Amec Foster Wheeler Energia Oy.  Finnvera’s contribution to the financing of the project is GBP 100 million, or roughly EUR 120 million.The construction of the power plant is estimated to cost approximately GBP 650 million, or about EUR 780 million.Preliminary construction work for the MGT Teesside plant will begin within the next few months. Commercial operations are due to start during the first quarter of 2020.  The 299 MW power plant will be fuelled solely by clean wood pellets and chips.“We’re glad of this opportunity to contribute to the export of Finnish renewable energy technology. Finland has solid expertise in this type of renewable energy technology. Elsewhere in the world – surprisingly– it is still often perceived as something new,” says Tuukka Andersén, Vice President and Head of Underwriting at Finnvera.“Finnvera’s participation in the project enabled long-term financing of 15 years. This is a key factor if a project of this type is to succeed,” he adds.Jaakko Riiali, VP, Commercial Operations at Amec Foster Wheeler Energia Oy, the company delivering the power plant boiler, sees the project as a good bridgehead for large biomass boilers of the power company class in Central Europe. In addition, the project serves as an example for more northern countries as well, showing that biomass as well as fossil fuels can be used to fuel large baseload plants. “Finnvera’s inclusion in the financial arrangements gave stability to the negotiations and made it considerably easier to reach an agreement on project financing,” Riiali says.Fuel from responsibly managed forestsIn order to ensure the sustainability of fuel supply, the biomass-fuelled power plant uses fuel acquired from FSC Forest Management certified forest areas. FSC certification guarantees that the fuel is derived from responsibly managed forests.The price paid by the British government for electricity produced using clean biomass is considerably higher than the normal price of electricity. The purpose is to support the attainment of the targets set by the UK Government and the European Union for CO2 emissions and to promote the objective of reducing coal combustion at both small and large power generation units.Additional information:Tuukka Andersén, Vice President, Head of Underwriting, Finnvera, tel. +358 29 460 2688Jaakko Riiali, VP, Commercial Operations, Amec Foster Wheeler Energia Oy, tel. +358 40 585 1590

Investments by internationalising enterprises finally on the rise

After a long decline, investments by enterprises seeking growth on international markets seem to have picked up in the first half of the year. The information is based on applications for financing that Finnvera has processed during the first six months of the year.“I think this is a good signal showing that enterprises feel more confident about investing. The change is particularly significant because the growth is based on intangible investments, such as research and development, and on various corporate reorganisations,” says Katja Keitaanniemi, Executive Vice President, SMEs.Intangible investments have in recent years accounted for 2 to 3 per cent of internationalising enterprises’ projects financed by Finnvera. However, during the first half of the current year, their share almost doubled. The amount of financing needed for corporate reorganisations also nearly doubled when compared against previous years.Keitaanniemi stresses the importance of intangible investments for developing long-term competitiveness.“When operating on international markets, Finland’s problem has been the relatively small company size, which means that the resources available are also small. When the company size increases, there are more opportunities to invest in international growth.“No single region or sector explains the growth in investments. The probable reason is therefore an increase in general investment activity,” Keitaanniemi presumes.The surveys conducted by the Federation of Finnish Financial Services and the Confederation of Finnish Industries also corroborate the positive trend. Despite the increase in investments, the working capital required by growth is still the greatest single need for Finnvera’s financing.Links:Growth > InvestmentsGrowth > Business operations abroadFill in the contact request form

Good networks are priceless in Iran

Contacts helped a health technology company to find a retailer. Outotec, in turn, has been doing business in Iran for over 40 years.Networks and contacts may be important in Finland, but in Iran they can be the lifeline of success.NewIcon, a Kuopio-based company specialising in automation solutions for medicine supply, was able to sign their first contract in Iran thanks to a good retailer. The following contracts also largely depend on the local retailer.According to Marketing Director Jori-Matti Savolainen of Kuopio-based NewIcon, good contacts helped the company to find the right retailer in Iran.“We were warned that everything proceeds slowly in Iran – especially as our customers are hospitals, that is, the public sector – and so we were surprised at how straightforward everything has been in comparison to other Middle Eastern countries,” says Jori-Matti Savolainen, Marketing Director of NewIcon.The company from Kuopio has customers the world over, for instance in Russia, Poland, Israel, the United Kingdom, the United Arab Emirates, Denmark and Sweden. However, most of the roughly EUR 5.5 million in turnover still comes from Finland.NewIcon can thank the Chairman of the company’s Advisory Board for finding the retailer.“Through the retailer’s contacts, our CEO was invited to Iran, to get to know our end customers. They were impressed that he actually came. At the turn of the year, we invited a delegation to Finland and showed them around at other health technology companies, too,” Savolainen reminisces.He is amazed at how much the Iranians know about Finland.“Thanks to Nokia, Finnish technology is appreciated. Our contacts also know of top-class Finnish surgeons we have never even heard of,” Savolainen says.In Iran for decadesThe history of Outotec, a listed company, differs somewhat from NewIcon. The company has been in Iran since 1973 – 43 years now.Adel Hattab, Executive Vice President, Markets Unit at Outotec, says that conducting business in Iran requires much time and presence.Adel Hattab, Executive Vice President, Markets Unit, says that their customers appreciate the fact that Outotec did not leave Iran even in hard times.“We have been open with respect to Iran and everything is done with security first. The trade embargo was a difficult period. We have big teams ensuring that we don’t sell anything inappropriate,” Hattab explains.Outotec’s projects are associated with the concentration processes of raw materials and the refining of metals. The company designs, builds and maintains equipment.Having visited Iran dozens of times, Hattab says that Iranians value interaction and bilateral relations.“They are demanding negotiation partners and shrewd in seeking good deals for themselves. People need to be known at all levels, including political decision-makers. As customers, Iranians are loyal,” Hattab lists.Savolainen of NewIcon agrees with Hattab’s characterisations. The Marketing Director says that their company has also had tough contract negotiations with their retailer.There are other differences in the business environment as well.“Patience is required in Iran and aggressive selling does not work. You need to talk about this and that with people. The first day you talk about sports and the family. It’s not until there’s a suitable moment on the second day when you start talking business,” Savolainen explains.Hitches in money transactionsAt NewIcon, assessment of the risks in the Iran deals was more about sufficient resources and economic risks.However, both Savolainen and Hattab name a risk that is shared by all companies: financing.“Investments don’t live up to their potential when the financial market is not functional. I hope that the bank system would recover and reach the same stage on average as elsewhere. Customers have big problems with letters of credit,” Hattab points out.He continues that the willingness of Western banks to take risks also depends on the United States’ attitudes towards Iran.Jori-Matti Savolainen of NewIcon advises Finnish companies to conduct their business in euros. Nor is it good to rely on any particular bank.“In Iran you should monitor which bank handles foreign transactions at any single time,” Savolainen advises.Text: Kimmo KoivikkoMore information:Credit risks in export tradeCountry classification

The owner is the determining factor

Different factors explain the success of small and large enterprises. According to studies, the company’s management is the most important factor for an SME. A large enterprise, in turn, has access to wider markets for management recruitment and, for instance, the option of transferring operations from one country to another to gain cost benefits. In consequence, for a large enterprise, the single factor having the highest correlation with the company’s success is simply its line of business. Since we at Finnvera have the opportunity to follow the stories of thousands of different enterprises and to observe the cause and effect relationships contributing to a company’s success – or sometimes, sad to say, its failure – I would claim that the owner is even more important for an SME than the management. Of course, these two are often the same person. But even when they aren’t, the owner has more direct influence over management selection and may intervene in the company’s day-to-day operations more than the owners of large corporations do. A good or a bad owner can be critical even for a large corporation – an example might be the revival of the Turku shipyard after its Korean owner was replaced by a German owner – but for an SME, the owner almost always has an absolutely pivotal role in the development and success of the Enterprise. Finnvera provides financing for over a thousand transfers of ownership each year. Statistics on the age structure of entrepreneurs reveal that the need for transfers of business to the next generation, and for business acquisitions, will continue at an exceptionally high level even for the next ten years. Surveys indicate that the principal bottlenecks are the matching of suitable buyers and sellers, accurate value determination and issues pertaining to taxation and law. Financing follows next. Together with enterprise organisations, Finnvera works actively to help eliminate all these bottlenecks. Throughout the country, we organise numerous events where buyers, sellers, experts in various fields and financiers can meet each other. Our goal is to ensure that as many enterprises as possible, after having been brought by their current owners along their own unique paths to this point in time, will find a good new owner who has the resources and the desire to continue in the future to the next success story! Pauli HeikkiläCEORead more about Finnvera's financing for transfers of ownership.


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