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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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The year 2017 marked a positive turn in the economy

Our goal is that the enterprises we finance succeed, grow and become more international. We want to be an agile specialised financing company that reforms its operations bravely. How we managed this all in 2017 can be found out on our Annual Report.

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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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Old models guide SMEs in exports – there is a clear need for financing knowledge

SMEs are too stuck in old operating models in their export activities. The main problems are the use of certain payment methods, poor awareness of receivables protection, long fund repatriation periods and even naivety. For instance, credit insurance is not well-known, although it enables enterprises to focus on sales and, at the same time, protect their sales receivables.These facts are revealed by Sanni Helppolainen’s Master’s Thesis for Lappeenranta University of Technology. Helppolainen is Finnvera’s Finance Manager for Eastern Finland.According to Helppolainen, payment methods that enterprises find safe diminish SMEs’ courage to expand trading to foreign countries or to seek new clients.“A new client might be required to make advance payments or the deal is off. For fear of credit losses, enterprises don’t dare to take risks, but another contributing factor is the fact that enterprises are not familiar with the mechanisms for protecting sales receivables. Knowledge about credit insurance, letters of credit or bills of exchange might encourage enterprises to expand their markets,” notes Helppolainen.For her thesis, Helppolainen interviewed 11 SMEs involved in export trade. Their turnovers range from EUR 3–30 million, and the sectors they operate in are similar to the sector distribution in Finnish exports of goods.“The enterprises interviewed mostly operate in the project delivery sector so they frequently use scheduled payments that naturally also include advance payments. Pure risk of the value of trade consisted of a 10–20% residual risk.”Caution as an obstacle to growthAdvance payments were the number 1 payment method also in the barometer published by Finnvera, Finland Chamber of Commerce and the International Chamber of Commerce ICC in June, focusing on enterprises’ financing knowledge in export trade. A total 92 per cent of the export trade financing barometer respondents said that they were well or quite well aware of advance payment as a means of managing buyer-related credit risks.“Caution is definitely a deterrent to growth in exporting enterprises. When only advance payments are used, deal sizes remain fairly small, whereas granting a payment period make larger client purchases possible,” estimates Helppolainen.However, SMEs’ caution often goes out of the window with regard to familiar partners. Only one of the enterprises Helppolainen interviewed had a written credit policy. In the other enterprises, the management had defined guidelines concerning the kind of trading the enterprise gets involved in.“You could say that enterprises are somewhat naive. They grant major limits and long payment periods to partners they know. The interviewees reported that there had been only a few individual cases of credit losses in export trade and the main credit losses originated from trading in Finland. For many, Anttila’s bankruptcy was a wake-up call, reminding enterprises of how a familiar partner may suddenly go bankrupt. Still, insuring domestic receivables is very rare.”The unknown credit insuranceOften sales receivables are the largest unprotected item on the balance sheet, although their protection is a significant element in enterprises’ risk management.For instance, knowledge of credit insurance is very weak among enterprises. The results of the thesis are in line with the results of the export trade financing barometer published in the summer as well as the results of the SME barometer survey commissioned by Finnvera, the Federation of Finnish Enterprises and the Ministry of Economic Affairs and Employment.With credit insurance, an enterprise may usually seek compensation after a 90-day payment delay, provided that the receivable is undisputed.“In Finland, credit insurance is quite a new form of insurance compared to the rest of Europe. Especially among smaller SMEs, it is not a familiar option. Larger enterprises do know how credit insurance works,” says Helppolainen.On the basis of the results, clients’ longer payment periods also pose challenges for enterprises involved in exports. Long fund repatriation periods may cause various problems, such as working capital being tied up and difficulties in cash management.“Factoring, or financing of invoice receivables, has increased. It makes funds available to enterprises faster. However, it does not automatically protect them from credit losses. The use of letters of credit is the rule rather than the exception among the respondents, especially enterprises involved in trading in Asia,” says Helppolainen.To improve awareness of export financing options and, as a result, export prerequisites, providers of export financing and credit insurers have decided to launch extensive cooperation to improve financing knowledge in SMEs involved in exports. The nationwide export trade financing tour will be launched in autumn 2018.Further information:Sanni Helppolainen, Finance Manager, Finnvera, tel. +358 29 460 2565Read also:Finnvera and the Chamber of Commerce: Finnish enterprises fail to close deals in export trade – financing options not well-known

The effect of the economic boost can be seen in export financing

Finnvera’s number of clients is over 27,000 of which approximately 100 are large corporates. However, measured in euros, the highest volume comes from the large corporates’ export trade financing. The total exposure of Finnvera’s export credit guarantee and special guarantees amounted more than EUR 23 billion at the end of June. The exposure has risen as a result of strong demand for financing especially in the cruise ship sector and telecommunications in the United States, says Executive Vice President Jussi Haarasilta.Finnvera’s half-year report shows that the ten largest exposures i. e. buyers account for 71 per cent of all outstanding guarantees.  The main sectors in export financing exposure are shipping, telecommunications and forest industry that account for 89 per cent of the total exposure.”Sectoral concentration is a well-known factor that is part of the nature of export credit guarantees. In Finland, these three are the biggest export sectors whose projects Finnvera is involved in by guaranteeing and financing. Through reinsurance, we prepare for increased exposures and also strive to mitigate the sectoral concentration. Reinsurance is a keypart of our risk management. According to our risk management strategy we also search for new covering methods”, says Executive Vice President Jussi Haarasilta.As a result of the economic expansion and good economical situation in recent years companies’ finances are on a sustainable base.In Finnvera’s exposure the risk ratings of enterprises, banks and countries have remained largely unchanged, and new large exposures mainly fall into good risk categories.Financing assosiated to future deliveriesAt the end of June, the subsidiary Finnish Export Credit Ltd had export credit agreements amounting to EUR 12.8 billion (EUR 12.5 billion), including drawn credits totalling EUR 5.6 billion (EUR 4.8 billion) and credit commitments totalling EUR 7.2 billion (EUR 7.7 billion). The credit risks associated with this exposure are fully covered by means of export credit guarantees granted by the parent company Finnvera plc that are included in the above-mentioned total exposure for export financing.However, during the first half of this year, the number of new major export projects entering the pipeline was lower than last year.”We stated in our financial statements in the spring as well as in our half-year report in June that more than half of the total exposures for large corporates' export credit guarantees and special guarantees was tenders or agreements associated with future deliveries. It is exceptional in Finnvera’s history and reflects the fact that companies have demand extending years ahead. Of the more than EUR 23 billion exposures undrawn guarantees amount to EUR 13 billion. This means that we have made a binding agreement of an export credit guarantee or financing and it is drawn when the product is ready to be handed over to the buyer.”A positive development is that SME and midcap export has picked up.  During the first half of the year a  greater share of SME and midcap financing granted by Finnvera is targeted at investments and export projects. Our goal is to accelerate investments and export projects with the aid of advisory services, together with other providers of financing and credit insurers.Additional reading:This is how buyer financing works – watch our video (in Finnish)Finnvera Group's Half-Year Report 1 January–30 June 2018Risk mitigation is an element of export credit operations

These countries are exporters interested in - What is the outlook for export financing?

The news right now is characterised by uncertainty in world politics and the world economy, which poses challenges for enterprises involved in exports. On the other hand, enterprises see a lot of potential for growth in internationalisation and export trade. In the export trade financing barometer published in June, even more than half of respondents reported that they are planning to start exports to new destination countries. –Export is extremely important for the entire Finnish economy. Often the impression of export is dominated by large corporates but the importance of export is clearly seen in the SME’s cooperating with large corporates. Companies within industry clusters and networks promote one another’s growth, says Executive Vice PresidentJussi Haarasilta of Finnvera.The top 10 export countries are nearly the same as the countries enterprises turn to in their search for new export markets. Only the order is slightly different. In the plans of enterprises, the number 1 country is Germany. The United States and China move upwards on the list and Russia downwards. Export trade financing barometer 6/2018:Most important export countries, top 10 To which countries are you planning to start export trade? Sweden 52 %Germany 40 %Norway 26 %Russia 23 %Estonia 22 %USA 20 %UK 17 %France 16 %China 15 %Poland 13 % Germany 14 %Sweden 13 %Norway 13 %USA 12 %China 11 %France 10 %UK 10 %Russia 9 %Denmark 8 %Canada 6 % All respondents, n=654 Planning export trade to new countries of destination, n=341 What do these countries look like from the export financing point of view?Industrialised Western countriesThe estimated outlook for financing in Finnvera’s half-year report, released August 22th 2018, stated that demand for export financing for trade to industrialised Western countries remains strong.An example of the neighbouring countries is Norway where there are an estimated 200–300 Finnish companies operating in the country, but there is potential for many more Finnish exporters. Norway’s share of the Finnihs export is approximately 3 per cent. Traditionally, the construction industry, oil, gas and energy industries have attracted companies to Norway. Efforts are made actively to increase exports to Norway, and Finnvera and Business Finland have now had a joint representative in Norway for more than a year. At the moment, Commercial Counsellor Jukka Suokas works in this position.RussiaFor a long time, Russia has been an important trading partner for Finns. Russia is also one of Finnvera’s largest country exposures.“Enterprises with extensive experience in exports still find opportunities in Russia. Good personal relations and a long-time experience in Russian trade make it possible to continue trading also during recession,” says Timo Pietiläinen, Head of Finnvera’s representative office in St. Petersburg.There are still many enterprises contemplating the export opportunities offered by Russia, but there are fewer new players than before. According to Pietiläinen, uncertain market conditions have driven enterprises to look for new potential export markets elsewhere. Demand for Finnvera’s financing for new projects in Russia is relatively weak and enterprises postpone their investment decisions due to sanctions and the increasing uncertainty of the business environment.United StatesFor many enterprises, the US market is still the epitome of successful world conquest. In the export trade financing barometer, the country was the fourth most popular new export market among enterprises contemplating the expansion of their export trade. However, currently the United States’ protectionist economic approach and political fluctuations impair predictability. For instance, import tariffs do not necessarily have a direct impact on Finnish enterprises involved in export trade, but multiplier impacts may have indirect effects.From Finnvera’s point of view, the United States is a special case as, due to cruise ship deals, the country is Finnvera’s largest country exposure by far and an extremely important country of export for Finland. The United States is always an interesting market, and its development is followed closely at all levels of business life.ChinaAt the moment, China is investing strongly in different parts of the world. However, there seems to be export opportunities to China opening up as well. Finnvera’s export financing exposure in China has remained low for a long time, but a slight increase in demand is in sight.“It seems that in China there has emerged a need to diversify sources of financing and learn to cooperate with Western providers of financing. Talk about a trade war and the possibility of stronger protectionism increase uncertainty, and it is still too early to say how this will affect trade between Finland and China. Finnvera estimates that, for the time being, the favourable economic situation will improve enterprises’ opportunities to acquire financing but, due to increasing political uncertainty, it is difficult to anticipate future development,” says Team Leader Anu-Leena Koskelainen.Other countries: BrazilBrazil is one of Finnvera’s largest country exposures and, especially in the forest industry and telecommunications, it is an important country of export for Finland. There are also opportunities in the energy sector and in the gradually recovering mining industry. The challenges related to the political system create uncertainty in Brazil, but the country’s economy is expected to grow despite the growing need for structural reforms. Demand for export credit guarantees is estimated to gradually take an upward turn after a few quieter years. The main potential can still be found in the wood processing sector, but demand in smaller projects opens up opportunities in a wide range of sectors as Brazil’s demand is an excellent match for Finnish supply.  IranThe withdrawal of the United States from the Iran nuclear deal and the new sanctions changed the situation in Iran, a country where Finnish enterprises involved in export trade had increased their activities little by little. There would be interest and demand with regard to Iran but, due to the sanctions, banks cannot finance export trade transactions and neither can Finnvera grant export credit guarantees. Consequently, exports to Iran have practically come to a standstill.TurkeyThe Turkish lira plummeted in August as the United States placed sanctions and import tariffs on Turkey. Even before that, the country had been suffering from the current account deficit and an impaired business atmosphere for a long time.“The situation in Turkey appears to be continuously deteriorating. Turkey’s OECD rating lowered to the category 5/7 at the June rating meeting. It means that ECA’s have a common view of the increased risks which affects for example the pricing of the export financing. Finnvera assesses project risks on a case-by-case basis and, for instance, grants short-term letter of credit guarantees to banks with risk sharing. In this manner, we try to support new export trade transactions and ensure that they become reality. We follow the situation closely and are currently adhering to a case-by-case country policy,” says Anu-Leena Koskelainen.More financing knowledge to exporters Finnish SMEs involved in export trade are likely to fail to close deals as they are not sufficiently familiar with the financing options offered to the buyer. One in five enterprises involved in exports have suffered from credit losses in recent years due to the buyer not paying its invoices. All this is revealed by the export trade financing barometer commissioned by Finnvera, Finland Chamber of Commerce and the International Chamber of Commerce ICC and published in June.To increase awareness of financing options and protection against risks, Finnvera, Chambers of Commerce, banks and private credit insurers organise an export trade financing tour that provides advice on export challenges especially to SMEs involved in exports. The tour will begin in Jyväskylä on 26 September and cover 10 locations.Further reading:Finnvera and the Chamber of Commerce: Finnish enterprises fail to close deals in export trade – financing options not well-known Finnvera Group’s Half-Year Report 1 January–30 June 2018 - Strong demand for financing has raised export financing exposures

Press Releases
Finnvera Group’s Half-Year Report 1 January–30 June 2018

Finnvera Group, Stock Exchange Release 22 August 2018, Half-Year Report H1/2018, at 12:30Strong demand for financing has raised export financing exposures CEO Pauli Heikkilä:“The world economy has boosted the growth of the Finnish economy. Strong demand for financing, especially in the cruise ship sector and telecommunications, has raised Finnvera’s export credit guarantee and special guarantee exposures to more than EUR 23 billion, of which drawn guarantees amount to EUR 10 billion. The undrawn guarantees, EUR 13 billion, are associated with future deliveries. However, during the first half of this year, the number of new major export projects entering the pipeline was lower than last year.In the first six months of the year, the volume of loans and guarantees granted by Finnvera to SMEs and midcap enterprises was slightly lower than last year. Banks are largely taking care of corporate financing at the moment, and Finnvera’s role is to supplement the financial markets. Financing offered by the European Fund for Strategic Investments (EFSI) has proved to be easily found by Finnish enterprises, which in part replaces the financing provided by Finnvera. One of the positive developments that we have witnessed is that a greater share of SME and midcap financing granted by Finnvera is targeted at investments and export projects. Our goal is to accelerate investments and export projects with the aid of advisory services, together with other providers of financing and credit insurers. Impact is one of the key indicators of our success, and we provide advisory services to promote the growth and internationalisation of enterprises in a new way.The Group’s profit for the first six months of the year was EUR 49 million. The profit was lower than in the corresponding period last year. The goal of self-sustainability set for Finnvera is that the income received from the company’s operations must, in the long run, cover the company’s operating expenses. Finnvera continuously develops its operations and risk management through reinsurance, among other means.”Finnvera Group, business operations and the financial trendH1/2018 (H1/2017) Loans and guarantees granted: EUR 0.4 billion (EUR 0.5 billion), change -3% Export credit guarantees and special guarantees granted: EUR 1.4 billion (EUR 6.3 billion), change -77% Export credits granted: EUR 1.1 billion (EUR 5.7 billion), change -80%One of the factors behind the year-on-year decrease in the amount of export credit guarantees and export credits was that last year, there were certain major tenders in shipping and telecommunications. 30 June 2018 (31 December 2017) Exposure, loans and guarantees for SMEs and midcap enterprises: EUR 2.1 billion (EUR 2.1 billion), change -3%Authorisation pursuant to law: EUR 4.2 billion, of which EUR 2.1 billion (EUR 2.1 billion) is used Exposure, export credit guarantees and special guarantees, including SME and midcap export credit guarantees: EUR 23.3 billion (EUR 22.6 billion), change 3%, of which drawn guarantees amount to EUR 10.0 billion (EUR 9.1 billion), change 9%Authorisation pursuant to law: EUR 27.0 billion, of which EUR 18.8 billion (EUR 18.7 billion) is used Exposure, export credits: EUR 5.6 billion (EUR 4.8 billion), change 17% The credit risk for Finnish Export Credit Ltd’s export credits is covered by the parent company Finnvera plc’s export credit guarantee.Authorisation pursuant to law: EUR 22.0 billion, of which EUR 11.8 billion (EUR 11.2 billion) is used   The targeted cumulative self-sustainability has been achieved,and Finnvera's operations have been self-sustainable troughout the company's nearly 20 years of operation. Net interest income and net fee and commision income H1/201888 MEUR (H1/2017: 90), change -2% Net impairment loss on financial assetsH1/201815 MEUR (H1/2017: 9), change 68% Profit for the periodH1/201849 MEUR (H1/2017: 57), change -14% Balance sheet total30 Jun 201812.3 Billion EUR (31 Dec 2017: 10.3), change 19% Non-tied capital and The State Guarantee Fund 30 Jun 20181.8 Billion EUR (31 Dec 2017: 1.7), change 1% Average number of employeesH1/2018 376 (H1/2017: 381), change -1% Equity ratio30 Jun 201810.2% (31 Dec 2017: 12.7) Capital adequacy, Tier 1, domestic operations 30 Jun 201825.8% (31 Dec 2017: 25.3) Expense-income ratioH1/201828.1% (H1/2017: 25.4) The Group’s profit for January–June was EUR 49 million (EUR 57 million), showing a year-on-year decrease of 14 per cent. The most significant factors behind the decrease were the year-on-year increase in the parent company Finnvera plc’s loan impairment in SME and midcap financing as well as guarantee losses and loss provisions. Introduced at the beginning of 2018, the State’s lower credit and guarantee loss compensation in SME and midcap financing (50 per cent) increased the amount of losses for which the Group is liable. Furthermore, the IFRS 9 Financial Instruments standard entered into force at the beginning of 2018, which influenced the January–June impairment and loss provision entries and decreased retained earnings on the balance sheet. The standard’s impacts on the profit may also be significant in the future, especially in export financing. Finnvera GroupFinancial trend H1/2018MEUR H1/2017MEUR ChangeMEUR Change% 2017MEUR Net interest income 23 23 -1 -3% 46 Net fee and commission income 65 66 -1 -2% 127 Gains and losses from financial instruments carried at fair value through P&L 0,1 3 -2 -95% 1 Administrative expenses -23 -22 1 4% -43  - of which personnel expenses -14 -15 -0,1 -1% -29 Gross impairment loss on financial assets -27 -20 7 38% -41 Credit loss compensation from the State 13 11 2 14% 23 Operating profit 51 60 -9 -15% 109 Profit for the period 49 57 -8 -14% 107 Outlook for financingIn June, the Bank of Finland raised its growth forecast for the Finnish economy: according to them, GDP will grow by 2.9 per cent this year. During the first half of the year, the share of investments in SME and midcap enterprise projects partially financed by Finnvera grew by nearly 6 percentage points year on year. In the good economic situation, investment activity and growth are likely to continue. We expect that this year, demand for Finnvera’s financing and the amount of financing granted by Finnvera, both measured in euros, remain at the same level as last year. In line with our strategy, we target SME and midcap financing at the early stages of business operations, growth, internationalisation and transfers of ownership, which altogether currently account for 86 per cent of the financing provided by us.During the first six months of the year, export financing granted to SMEs and midcap enterprises increased by 17 per cent year on year and the share of export financing in all SME financing grew. The increasing of SMEs’ exports and their export trade financing knowledge is an important focus area that will be promoted in the coming year through an extensive financier cooperation network and advisory services. We expect that this will increase demand for export financing in the future. The acceleration of transfers of ownership continues and related demand for financing will probably remain at the same level as in the previous years.Demand for export financing by large corporates for trade to industrialised Western countries is likely to remain strong. However, when it comes to Russia, one of Finnvera’s largest country exposures, we expect exposure to continue decreasing. Demand is weak and enterprises postpone their investment decisions due to the increasing uncertainty of the business environment. Of Finnvera’s large country exposures, Brazil is facing problems in administration that create uncertainty, but the country’s economy is expected to grow and demand for guarantees is anticipated to gradually take an upward turn. The largest projects are in the wood processing sector, with demand in smaller projects probably spreading more extensively across different sectors. Finnvera’s exposure in China has remained low for a long time, but a slight increase in demand is in sight. Nevertheless, the possibility of increasing protectionism increases uncertainty. For the time being, the favourable economic situation improves enterprises’ opportunities of acquiring financing but, due to increasing political uncertainty, it is difficult to anticipate future development.Further information:Pauli Heikkilä, CEO, tel. +358 29 460 2400Ulla Hagman, CFO, tel. +358 29 460 2458Appendices:Half-year report 1 January–30 June 2018 (PDF)Distribution:NASDAQ Helsinki Ltd, London Stock Exchange, the principal media, www.finnvera.fiFrom now on, the Finnvera Group’s half-year report only contains information about the Group. Previously, the half-year report contained information about both the Group and the parent company. The half-year report is available in Finnish and English at

Finnvera’s minimum loan and guarantee amounts will rise – the primary product for the financing of an SME start-up is the Start Guarantee

The minimum Finnvera Guarantee amount will rise to EUR 10,000 and the minimum Finnvera Loan amount to EUR 30,000 starting from 1 September 2018.In line with its strategy, Finnvera is shifting the focus of financing granted increasingly to guarantees. The change is driven by the diversification of the corporate financing market, brought along by new operators and new forms of financing.Finnvera’s primary product for the financing of an SME start-up is the Start Guarantee. With the Start Guarantee, an enterprise can get bank financing for its various investment and working capital needs. The entrepreneur agrees on the financing amount and other terms and conditions with their bank, and the bank also applies for a Start Guarantee from Finnvera on behalf of the entrepreneur. The minimum Start Guarantee amount is EUR 5,000 and the maximum amount is EUR 80,000.If the SME was registered in the Trade Register more than three years ago, the Start Guarantee cannot be used. Instead, the enterprise can apply for loan or guarantee financing directly from Finnvera. In this case, the financing products used are mostly the Finnvera Guarantee or the Finnvera Loan. Starting from 1 September, the minimum Finnvera Guarantee amount is EUR 10,000 and the minimum Finnvera Loan amount is EUR 30,000. Applications for financing should be submitted through the online service.Read more about the Start Guarantee

Health technology exports bring a hefty amount of euros into Finland

There is strong demand for Finnish health technology around the world: last year, the sector’s exports grew to EUR 2.2 billion. One of the newcomers is Elers Medical Finland, led by CEO Niklas Elers, who is determined to defeat hospital-acquired infections.According to Finnvera’s Finance Manager Laura Laine, Elers Medical Finland is a good example of Finnish health technology know-how. The enterprise already has global networks, invests in product development, possesses high-level expertise and is working to solve a major problem.“There is a global search for solutions for the prevention of illnesses, personalised health care and bacterial resistance as well as generally more cost-efficient operating models. There is still plenty of potential for growing exports,” says Laine.The Ministry of Social Affairs and Health has estimated the potential to amount to EUR 10–20 billion.Last year, health technology exports grew faster than the global markets, by 5.3 per cent. The export figures do not include pharmaceuticals or well-being business. The largest target markets are the United States and the European Union.“Large corporates act as drivers in this sector and use a lot of subcontracting in innovation activities. They could do even more to help smaller enterprises in sales and marketing. Especially opening the doors is important,” explains Laine.According to her, exports by health care enterprises can also be seen at Finnvera, even though there are no sector-specific statistics. The product development cycle is long as the sector is strictly regulated. It takes a lot of financing to get to the marketing authorisation phase.“In product development, the role of equity is crucial. After that, our financing contributes to working capital, investments and export trade transactions. Enterprises also use credit insurance and buyer financing. Especially the first deals are tough for the cash position as the enterprise has to wait for the money for a long time,” comments Laine.As a solution, she brings up the leasing model. In public procurement, products could be leased instead of being sold; in other words, the use of the product could be sold as a service. This would accelerate decision making and generate continuous cash flow for the enterprise.Controlling hospital-acquired infectionsElers Medical Finland is only three years old but the turnover of the fast-growing group of companies will already exceed EUR 2 million this year.Elers Medical has invested strongly in product development. The products developed by it help to prevent the spread of hospital-acquired infections. The group company Gabriel Scientific has patented filter-ventilated cushioning products.“At the moment, we manufacture and distribute patented hygienic pillows, duvets and mattresses and antibacterial hospital curtains for hospital patient rooms. Product groups are exported to approximately 40 different countries. The World Health Organization has calculated that in the USA and the EU alone, more than 100,000 people die of hospital-acquired infections,” says CEO Niklas Elers.For the manufacture of antibacterial curtains, Elers Medical has established a factory in China. China was selected as the manufacturing site on the basis of the geographic location of raw materials and subcontractors. In the future, Elers Medical intends to invest in curtain production in Finland, too.The international growth of this Helsinki-based company is boosted by a significant retail agreement with an English company. The agreement period is two years.“Our goal is to become the principal of EUR 10–50 million retailers. Well, the English company is in the billion category.”Elers himself has a commercial background. His career has given him a good overall picture of how things work in the hospital world.Networking and international operations are key factors. The enterprise’s management is based not only in Helsinki but also in Ireland, Scotland and China. In addition, there are altogether nearly 30 employees in China and Estonia. In product development alone, work has been outsourced to three engineering offices.Elers Medical also has an American venture capital investor as a minority shareholder. The venture capital investor came in in connection with Team Finland’s R&D project a year ago.“At their highest, product development costs have been EUR 300,000 per year. Now the products are ready, even though we of course think about new products, too. Luckily, we have had the right people and an existing global network. If we had had to start from scratch, we would never have seen the light of day,” notes Elers.Exporting requires moneyIt is not cheap to build an international enterprise.Elers calculates that the personal savings he has used amount to a six-figure sum. In addition, investors have provided financing. Finnvera, Business Finland and OP Corporate Bank plc have provided Elers Medical with, for instance, a Start Guarantee, an R&D loan, internationalisation and trade fair grants, a loan guarantee for exports and various loans. “We get money from the client gradually. Either after 60 days if the product has arrived at the destination or at the latest after 80 days. Taking risks does not feel so bad when there is demand for products anyway,” says Elers.Finnvera’s Laine urges also other SMEs seeking international growth to take the preparation of financial and cash flow calculations seriously.“Enterprises must know the market and calculations have to be realistic. Financing must be considered as part of the growth plan. At the same time, it is good to identify the risks. The protection of sales receivables is one of the most important tasks in an enterprise,” says Laine.

Foreign buyers’ interest in buyer financing is increasing

Arranging financing for a foreign buyer is often an important element of export trade negotiations, in both small and large transactions. Buyer financing increases the competitiveness of the offer and improves the opportunities of closing the deal in a competitive market. Foreign buyers’ interest in the arrangement of financing has also increased in recent years. Buyer financing played a key role in Raumaster’s and Konecranes’ trade transactions in Thailand.Export trade transactions are often the sum of many parts. The buyer may already have financing in place but could still be interested in other financing options, too.“Foreign buyers’ interest in the arrangement of financing has increased in recent years, perhaps due to enterprises’ balance sheet thinking. They pursue a position in which they do not need to use existing bank limits but can seek alternative ways to arrange financing. Secondly, the low interest rate level of the euro also makes buyer credit an attractive option, although in that case, the buyer takes a currency risk,” says Vesa Kalenius, Vice President, Trade & Export Finance at Handelsbanken.He points out that especially for smaller export companies, the use of buyer credit is a major advantage that transfers the credit risk involved in export trade away from the company. In addition, it is worth noting that buyer credit does not protect against pre-delivery risks. That protection can be achieved with a pre-delivery credit risk guarantee or documentary credit granted by Finnvera – especially when manufacturing customised goods.“The use of buyer credit brings security into export trade transactions and is a reasonably inexpensive form of financing. In general, the arrangements are actively used by large enterprises, even if you would think that a single loss would not have a big impact on them. On the other hand, small enterprises rarely use them even though they are more extensively affected if losses occur,” Kalenius comments.The arrangement of financing might be crucial for SMEs’ export efforts or minor export trade transactions.“We started developing buyer credit for minor export trade transactions, ranging approximately from EUR 2 million to EUR 20 million, and created a simplified loan agreement, in which terms, conditions and documentation are condensed into a couple of appendices.It proved to be well-functioning in Sweden and was piloted in Finland, too, when there were inquiries for financing in small projects. The up side is that the loan agreement is easy to understand and accept. The down side is that it is a standardised package with only a little flexibility. However, it is generally functional in minor export trade transactions,” says Kalenius.An export company salesperson’s toolbox should always contain a financing option The arrangement of buyer financing came up when Raumaster Paper, a company from Rauma specialising in material handling systems, conducted trade negotiations with Hiang Seng Fibre Container Company, located in Thailand and manufacturing paper, board and cardboard packaging and boxes. The 2,000-employee plant expanded its operations and needed new machinery. Raumaster Paper was selling a conveyor system for the plant, for taking reels of board from the slitter to the automated warehouse.Financing was arranged by Handelsbanken, with a guarantee from Finnvera.“We had used buyer credit arrangements in 2006 in a transaction in Turkey. In that case, we had Italian competitors who used a similar arrangement. Finnvera gave a guarantee to a German bank and we won the deal. The need for buyer financing depends on the client,” says Kaarlo Talvinen, Sales Director at Raumaster Paper.The lifting equipment manufacturer Konecranes delivered an automated paper warehouse crane to the same plant in Thailand and also utilised buyer financing, a financial instrument that is very familiar to Konecranes. Matti Malminen Director, Trade & Export Finance at Konecranes, says that buyer credit is well suited to both large corporates and SMEs involved in exports, for small and large transactions alike. Not all transactions are worth tens or hundreds of millions. He praises Handelsbanken’s flexibility in arranging buyer financing. “Often the buyer asks early on about financing possibilities or whether we can grant a certain payment period to the buyer. We tell them that we are a crane manufacturer, not a bank, but we know good third parties who can help them,” Malminen says.According to Malminen, certain buyers want to use buyer credit for transparency’s sake, for instance. As the buyer pays all expenses, the costs are fully known.“We would like to encourage the SME sector to use various forms of export financing. You can get help from Finnvera and banks once you dare to take the first step. The goal is to boost Finland’s growth with export trade and, in that sense, it is great that various financing possibilities are available to SMEs, too.”Malminen emphasises that an export company salesperson’s toolbox should always contain at least the basic information about different financing options as often competitors from different countries can offer financing to the buyer.“Without financing, you might lose deals and never find out why.”Joint efforts to export Finnish know-howTuula Jermilä, Finance Manager at Finnvera, says that export trade arrangements require a long-term approach and financing arrangements are not necessarily easy when there are several parties involved. Export trade is team play, in which the provider of financing should be involved as early as possible to make the process easier for the exporter.In small export trade transactions, the exporter conducts preliminary negotiations about financing with the buyer, the bank takes care of the actual credit negotiations and Finnvera’s role is to cover the credit risk related to the buyer’s ability to pay. Often Finnvera makes the decision about accepting the credit risk already after the exporter’s preliminary contact.When the financing bank has been found, negotiations continue with the credit terms and conditions. These negotiations may take a long time and the terms and conditions are often specified in further detail only when trade negotiations proceed. In practice, the bank always acquires approval from Finnvera for the key credit terms and conditions during the negotiations. The buyer may have several financing options and, in the end, it is the buyer who decides which financing option to choose. “The most important thing is that the exporter wins the deal,” says Jermilä.Buyer credit gives security to the exporterThe length of the trade negotiations surprised Raumaster’s Kaarlo Talvinen. However, the duration depends on many factors, not only on phases related to financing and credit. In any case, Talvinen is satisfied with the successful closing of the deal. He believes that on a case-by-case basis, buyer financing will be useful in the future, too.“The buyer credit arrangement provides us with security, too: the bank makes the scheduled payments after the advance payment directly to us against our invoices and documents received from the client.”Currently, Raumaster’s operations focus increasingly on Europe. The boom is on and there are a lot of offer-related inquiries. Orders placed extend well into the next year. However, the company’s market area is the whole world. Talvinen says that in negotiations, you must always be familiar with the local culture and know the rules and conventions with regard to the proper moment to start discussing financing. Achieving trust is important in the long term.“Our goal is to establish a long-term relationship with the client, not to conduct individual trade transactions.”Read more:Finnvera and the Chamber of Commerce: Finnish enterprises fail to close deals in export trade – financing options not well-knownFinancing for the buyerWatch the video to see how buyer financing is used in export trade transactions (in Finnish)


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