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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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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)

Finnvera and the Chamber of Commerce: Finnish enterprises fail to close deals in export trade – financing options not well-known

Finnish SMEs involved in export trade are very likely to fail to close deals as they are not sufficiently familiar with the financing options offered to the buyer. They are not aware of the significance of buyer financing as a competitive advantage. During the past two years, one in five enterprises involved in exports have suffered from credit losses due to the buyer not paying its invoices. Indeed, export trade is restricted by the fear of credit losses. At the same time, many enterprises feel that they do not need to manage the financing risks associated with export trade. All this is revealed by the export trade financing barometer commissioned by Finnvera, Finland Chamber of Commerce and the International Chamber of Commerce ICC.Larger enterprises that are actively involved in export trade are fairly familiar with export trade credit risk management and buyer financing options. Among SMEs, there is sometimes surprisingly little awareness of export trade procedures and available services.“The Finnish economy is driven by exports but relies on large corporates. The share of SMEs in export trade is among the lowest in the Nordic countries. According to our survey, export trade deals have been lost due to factors related to financing or credit risk management, so improving export trade financing knowledge would make it possible to close more deals,” says Finnvera’s CEO Pauli Heikkilä.A total of 39 per cent of enterprises that have failed to close deals in export trade reported that the buyer could not arrange financing. In addition, 11 per cent reported that the buyer had received financing on better terms from a foreign competitor. In both of these cases, enterprises could tackle the challenges with the help of a bank and an export credit agency. What is alarming is that the lack of buyer financing has especially affected enterprises that are strongly oriented towards growth and have the best potential for internationalisation.One in five enterprises involved in exports took no measures to protect themselves from export trade credit risksHalf of Finnish enterprises involved in exports carry out export trade transactions with invoices and thus grant a payment period, even if it is a short one, to the buyer. Nevertheless, sales transactions with a payment period always involve a risk of credit loss as the buyer may leave the invoice unpaid.Three out of four enterprises use advance payments in their export trade transactions to protect themselves from credit risks. Documentary credits, bank guarantees, credit insurance or Finnvera’s export credit guarantees are mainly known among the largest enterprises involved in exports. No fewer than one in five enterprises that responded to the survey had not taken any measures to protect themselves in export trade transactions. Nearly half of them estimated that no protection was necessary. A small percentage of the enterprises admit that they do not know the means of protection well enough.“The majority of SMEs do not know the options available for protecting themselves against credit risks and, consequently, they are not able to benefit from these options in boosting their export trade. They fail to close deals or simply keep out of export markets for the fear of credit risks. Almost 60 per cent of respondents find that a single loss may jeopardise their operating capacity for a long time,” comments Timo Vuori, Chief Executive, ICC Finland.Providers of financing, credit insurers and the Chambers of Commerce cooperating to improve enterprises’ financing knowledgeOn the initiative of Finnvera, Finland Chamber of Commerce and the International Chamber of Commerce ICC, providers of export financing and credit insurers have decided to launch extensive cooperation to improve financing knowledge in SMEs involved in exports. In 2018–2019, a regional export trade financing tour will be organised. In addition to Finnvera and regional Chambers of Commerce, other tour participants include the largest banks operating in Finland and all private credit insurers.“We have a shared interest and goal in promoting Finnish exports and economic growth. We will increase the amount of advisory services and, starting in the autumn, we will organise export financing workshops for enterprises around the country. We will go to enterprises and lower the threshold, with the aim of reaching the nationally declared goal of increasing the number of SMEs involved in exports,” emphasise Heikkilä and Vuori.The survey was conducted by Taloustutkimus, commissioned by Finnvera, Finland Chamber of Commerce and the International Chamber of Commerce ICC, with an online survey and telephone interviews in April–May 2018. The survey was taken by 654 Finnish enterprises involved in direct export trade. In these enterprises, the share of exports of the total turnover is 42 per cent and the average export turnover is EUR 12.7 million.Further information: Pauli Heikkilä, CEO, Finnvera, tel. +358 29 460 2400, pauli.heikkila@finnvera.fiTimo Vuori, Chief Executive, ICC Finland; Director, Finland Chamber of Commerce, tel. +358 50 553 5319, timo.vuori@chamber.fiAppendix: Survey summary (pdf, in Finnish)

Export credit agencies and private insurers work hard to boost export trade – Finnvera awarded as the best ECA in 2017

A hundred years ago, the world was recovering from the First World War. The first credit insurers and export credit agencies that provided export risk insurance were founded to boost the post-crisis world trade. Export was needed to back up economic growth and exporters needed both protection against trade-related risks and financing for their operations. Export credit agencies and credit insurers are still needed for the same reasons. Using insurance against political risks and export trade credit risks is a growing trend globally.In 2017, already 14 per cent of the world’s exports of goods and services was covered with credit insurance, reports the Berne Union, an international organisation of credit and investment risk insurers. The organisation was founded in 1934, and its 85 members from over 70 countries are state export credit agencies, private credit insurers and multilateral insurers, which all provide insurance for risks related to exports and foreign investments. Globally, the combined new business operations of the Berne Union members amounted to USD 14 trillion last year. The sum is only slightly smaller than USA’s GDP and clearly exceeds China’s GDP, amounting to approximately USD 2,000 per every inhabitant of the world.In recent years, the role of private credit insurers has grown and the private market has gained ground when compared to state bodies. According to Topi Vesteri, Deputy CEO of Finnvera and President of the Berne Union, this is a welcome trend. Vesteri was recently awarded with a TXF Industry Fellowship Award for his lifetime achievements in export finance.“In a boom market, the share of private operators increases while the share of state bodies does not grow as much. During recession, the tendency is opposite: private operators withdraw and public export credit agencies try to compensate for this market deficiency by adopting an increasing responsibility for export risks,” says Vesteri.Certain transactions are not possible without export credit agenciesAccording to Vesteri, state export credit agencies are not making themselves redundant in the foreseeable future, even if people might have sometimes thought and even wished so.“Private operators will not replace state bodies. Certain large transactions that require a long payment period just cannot be completed without the involvement of a state export credit agency. Another influencing factor is the tighter regulation of banks, which has resulted in ever fewer banks being willing to adopt the responsibility for risks and provide financing for export credits. And regulation certainly will not decrease,” comments Vesteri.In some cases, state agencies act as providers of direct export credit themselves, without banks’ involvement, or act as the main arrangers, syndicating part of the credit to banks. Furthermore, banks’ interest in handling small export credits is considered insufficient.Development has led to the situation in which the role of export credit agencies has grown at the international level in large export trade transactions with long payment periods and with more potential risks than average. Adopting the responsibility for such risks was exactly the reason why export credit agencies were founded to begin with. However, it is not all about risks – well-managed export trade can be business that is profitable for the state and has a significant impact on exports and employment. For instance, in Finland an approximately EUR 1.4 billion fund has accumulated from guarantee surplus, acting as a buffer against Finnvera’s potential future export credit guarantee losses.Asian countries increasing their influence – USA the main target countryOf the European countries, Germany and Italy feature among the largest export credit guarantee providers in the world. At the moment, there are three Asian countries in the top 5, including China whose strong impact on the world economy can be seen in this area, too.“The significance of the Asian countries as exporters has increased enormously. In fact, the largest export credit provider in the world is China Development Bank – and it isn’t even China’s official export credit provider. The official export credit providers are China Eximbank and the credit agency Sinosure, with the largest volumes in the Berne Union,” Vesteri notes.“We in the developed countries feel threatened when new exporting countries become more dominant in world trade. On the other hand, the standard of living has improved and entire countries, such as China and India, have risen or are rising from poverty, thanks to globalisation and exports.Export credits granted and guaranteed for trade to the United States account for the largest share of the entire export credit market.“Naturally, there are also risks involved with the United States. For instance, last year the largest category among indemnities paid by the members of the Berne Union was indemnities for credit insurance with short payment period, taken out for trade to the United States.”However, a more significant reason for the top position held by the United States is that the private sector there invests in products that require a long payment period and entail risks related to the sector and economic cycles, for instance."Publicly supported export credits are a precondition for large cruise ship transactions. Moulded by the crisis on the finance market the cruise shipping companies are not willing to sign large ship orders without ensuring a long time financing for deliveries that take place after many years." Finnvera awarded internationally as the best ECA in 2017Finnvera was ranked as the best performing export credit agency in 2017 in the importers’ market survey conducted by TXF Media, an international export trade and finance media and analyst. The respondents were capital equipment importers throughout the world. Finnvera ranked first in the Importers' Choice and performed particularly well in industry expertise, understanding of business and user-friendliness.  Finnvera was number one customer service and financing capacity. Finnvera improved their last year’s performance in both of these categories."In Finnvera we value this survey especially high for the fact that the companies that evaluate us were importers that buy goods from Finnish exporters. Our goal is to promote Finnish exports and more and more often the success in concluding deals depends also on co-operation with the buyer and how the Finnish exporter can offer the buyer a flexible financing", says executive vice president Jussi Haarasilta.Finnvera imnproved the performance also in deal execution and was appreciated for flexibility.The Importers’ Choice award was presented in TXF Global Conference in Prague the 6th of June 2018. Finnvera was also awarded in Exporters’ Choice survey as one of the top 3 ECAs that have managed to promote exporters’ business."We are very happy to stand out as the ECA that understands the needs of both exporters and importers and businesses. Thanks to our industry expertise we are able to find the best solutions for both parties in a way that also takes Finnvera’s risks of the deal carefully into account."TXF also granted the TXF Industry Fellowship Award to Finnvera’s Deputy CEO Topi Vesteri for his achievements in export finance industry.Read more:More information about the awards on TXF Media’s Twitter.TXF News website.

Topi Vesteri to be presented with the TXF Industry Fellowship Award for his service to the export finance sector

Topi Vesteri, Deputy CEO, Group CCO at is to be honoured with the TXF Industry Fellowship Award in recognition for his exceptional service to the international export finance sector. The award is granted by international trade and export finance news, data and event provider TXF.This is the first time this title has been awarded. Topi Vesteri’s career in Finnvera started in December 1998 and he was in charge of running the large corporates unit and export finance unit for almost 17 years. Since 2015 as Deputy CEO and Group Chief Credit Officer (CCO) of Finnvera, heading Finnvera's Credit and Analysis Unit he has managed Finnvera's credit risk analysis and credit decision making process. Internationally he has served as International Union of Credit & Investment Insurers, Berne Union's President (2015–) and Vice President (2002–2003) and as Chairman of the Union's Medium- & Long-Term Committee between 2009–2011, and also as a member of the Union's Management Committee during these years.“What Topi Vesteri has given to the ECA world and the export credit industry at large over the years has been nothing short of exceptional,” says Jonathan Bell, Editor-in-Chief and Director at TXF in London.”Finnvera has during these 20 years become known as one of the most innovative and service oriented ECAs, enjoying very high customer satisfaction. Finnvera has been constantly developing its products and services and working in close cooperation with international banks, private political and credit risk insurers as well as other ECAs. During Topi’s presidency in the Berne Union, the union has seen through such significant changes as the merger with the Prague Club. It is with great pleasure that we make this inaugural TXF Industry Fellowship Award to Topi, who is an inspiration to us all.”The award will be presented at the TXF 6th Global Export & Project Finance Conference in Prague on 6 June 2018. It is the largest annual event on trade and export financing with over 1,000 participants.Additional information:TXF: Vesteri to be presented with TXF Industry Fellowship Award

There is room among the big players – midcap enterprises have tremendous growth potential

Companies in the midcap category have the highest potential for boosting Finnish exports. The fastest road to growth is through acquisitions. This has been the path taken by Aulis Asikainen’s Comatec, which has an impressive 28 acquisitions under its belt.Midcap enterprises have every opportunity to be among the drivers of growth and exports in Finland. They have sufficient resources and they are already engaged in international operations.A midcap enterprise has an annual turnover of EUR 50–300 million and more than 250 employees. Depending on the method of calculation, there are 300–400 enterprises in this category in Finland.According to Pertti Lähdeaho, Financing Manager at Finnvera, various corporate reorganisation measures are the fastest option for reaching the next level.“Midcap enterprises have potential, but purely organic growth is a long road to take,” Lähdeaho says.The midcap category includes a large number of subsidiaries of large foreign corporations as well as family businesses.According to the PwC Global Family Business Survey, a report published over two years ago, seven per cent of Finnish family businesses aim for aggressive growth, while as many as 89 per cent look to grow at a moderate pace. The surveyed enterprises indicated they are specifically seeking growth in the international markets.“Enterprises need to have people with export- and culture-related expertise concerning new countries. The basic requirement for success is that the product is very good and there is demand for it in the global market. Rising through the ranks to enter the midcap category is difficult purely by subcontracting,” Lähdeaho explains.Moving forward by making acquisitionsAulis Asikainen’s Comatec has an impressive story of growth. Over a period of 33 years, the company has grown from a one-man enterprise into a group with more than 500 employees.This development has been propelled by Asikainen’s personal drive to grow the company. International business has been part of the strategy.“We were already doing international sales during the recession of the 1990s. We had to. We won assignments in the United States and Germany with the help of our partners at the time. They had strong relationships in those markets and they were familiar with the culture,” Asikainen recalls.Comatec is a Tampere-based engineering company that specialises in engineering design and project management for the technology industry and machine building. Comatec has subsidiaries in Estonia and Poland. The group also holds a stake in an Indian company that it obtained as part of an acquisition.After Comatec’s first acquisition 15 years ago, the group has continued to acquire companies almost non-stop, bringing the total number up to 28.“Acquisitions are a more effective way to achieve growth. The most difficult thing before making an acquisition is evaluating how the target fits the rest of our business. When the deal has been completed, you need to focus on how to integrate the acquired business. Over the years, we have developed a clear path. We can make two acquisitions per year. That seems to be the ideal rate from the perspectives of integration and financing,” Asikainen explains.The impact of acquisitions is clearly reflected in Comatec’s export figures. Two years ago, direct exports amounted to EUR 1.5–2 million. Last year, the figure approached EUR 5 million. Comatec’s total annual turnover is EUR 36 million.The engineering company's turnover would place it in the SME class, but it is considered a midcap enterprise in terms of the size of its personnel.“Direct exports have grown threefold since the recession that began in 2009. The economic slowdown again forced us to look for clients abroad,” Asikainen says.He admits that Comatec’s international growth has also required a lot of mental growth. The company has recruited new experts. On the Board of Directors alone, there are two university professors. Four of the Board members are external to the company.“We have hired business experts, a lawyer, a business analyst and many more. We are increasingly investing in technological development and the efficiency of project management,” Asikainen adds.Growth requires moneyIt takes money to achieve growth and internationalisation. According to Asikainen, Finnvera has played a big role in Comatec’s growth by providing guarantees. The engineering company has also had cooperation projects with Business Finland.According to Kalle Åström, Growth Loan Programme Manager at Finnvera, midcaps are compatible with all of Finnvera’s financial instruments except Entrepreneur Loans.He highlights the Growth Loan and bonds as examples.A Growth Loan supports a company’s equity. It is a junior loan, which means it is subordinated to senior loans.In practice, companies seek an unsecured Growth Loan from Finnvera in order to obtain more financing from other financial institutions. For example, financing of EUR 1 million can be arranged by having 20 per cent of it internally financed and 30 per cent covered by a Growth Loan. The remainder can then be financed by a bank loan.“With a bond, an entity acts as the issuer and sells the bond to investors. Finnvera can subscribe for half of the entire bond issue at a maximum. Bonds are suited to large financing requirements exceeding EUR 5 million,” Åström explains. Fact: What is midcap? An SME is a company that has an annual turnover of at most EUR 50 million and less than 250 employees. Typically, an SME employs 50–249 people. Finland’s 2,600 SMEs make up less than one per cent of Finnish companies. Midcaps are one level above SMEs in size. A midcap enterprise has an annual turnover of at most EUR 300 million. Midcaps have more than 250 employees. Finnvera’s Growth Loan is intended particularly for midcap enterprises. Read more about the Growth Loan

Smart exporters protect their receivables – take advantage of these risk mitigation methods

Export trade involves credit risks arising from the buyers themselves as well as from the buyer’s bank and country. The more customised and significant the export trade transaction is, the higher the significance of risk mitigation.The realisation of credit risk in a failed export trade transaction can be a fatal blow for an SME that is just getting started with exports. When you apply a systematic approach, take the necessary precautions against risks and create a credit policy for your company that defines the risks you are willing to take, you can safely increase your investments in the export trade without losing any sleep.“There are many ways to mitigate export risks. Advance payments, the choice of payment method, credit insurance and various financing solutions all come together in export trade as a comprehensive approach that exporters should discuss with their bank and Finnvera in a timely manner, even before putting in a bid,” says Minna Lindqvist, Development Manager at Finnvera.Advance payments reduce the need for other protection measuresThe higher the advance payments received from the buyer, the smaller the need for other protection measures. However, reaching an agreement on advance payments is not always successful, and your bid may not be competitive if it calls for advances that are much higher than those sought by your competitors.The buyer may also require collateral against advance payments, such as a bank guarantee issued on behalf of the exporter. The guarantee ensures that the buyer will receive a refund of the advance payment if the exporter is unable to fulfil its contractual obligations.In these situations, you can use our export guarantee as a countersecurity for your bank.Choosing the right payment methodSome of the payment methods used in export trade transactions leave the exporter fully exposed to the buyer’s ability and willingness to pay. Other methods ensure that payment will be received in almost any circumstance.Further reading: In export trade transactions, choosing a payment method is, first and foremost, a part of risk managementYou insure your luggage when you travel, so why would you not insure your export receivables?Credit insurance is a service that, like other insurance, compensates you for damage when things do not go as planned. In export trade transactions, this means a situation in which the buyer fails to pay the agreed amount for one reason or another. Credit insurance products are offered by commercial credit insurance providers as well as Finnvera.Using credit insurance is a sensible decision especially when the payment method used in the transaction is not secure and therefore does not ensure that payment will be received.“Our export receivables guarantee is intended for post-delivery insurance needs involving short payment periods. It is generally used in ongoing trade with the same buyer when the payment period is a few months. Another product granted to exporters is the credit risk guarantee, which can even be used for transactions with longer payment periods and to mitigate the risk related to the cancellation of the transaction prior to delivery when the export product in question is customised to the buyer’s needs.In addition to these export credit guarantees granted to the exporter, we offer many credit risk protection products aimed at providers of financing.Further reading: Financing SME export trade transactions (in Finnish)

In export trade transactions, choosing a payment method is, first and foremost, a part of risk management

When a Finnish company is preparing a sales contract with a foreign buyer, one of the first decisions it makes is the payment method to be used in the transaction. Payment methods differ from each other in many ways but, from the exporter’s perspective, the most significant difference is the credit risk they involve. Some payment methods leave the exporter fully exposed to the buyer’s ability and willingness to pay, while others ensure that payment will be received in almost any circumstance.The starting point in the choice of payment method is often that the exporter would prefer to receive payment before delivery. Buyers, for their part, would prefer to pay after taking delivery.For an SME that is getting into the export business, it pays to compare different payment methods well before putting in a bid and choose the most suitable option for each case.“Every export company should consider the impact that realised credit risk would have on its finances. A secure payment method increases costs, but the expenses arising from the payment method are usually only a fraction of the impact that a payment delay or credit loss would have on the company’s result. Furthermore, these costs can be estimated ahead of time,” says Outi Mikola, Finance Manager at Finnvera.The more significant the transaction, the more secure the payment methodOne payment method is unlikely to suit every export trade transaction. When choosing the payment method, the aim is to find a solution that satisfies both the exporter and the buyer. The chosen solution should also eliminate unnecessary risks related to payment and the delivery of the goods.“Companies should have a risk policy that largely defines which risks they are willing to take in different types of transactions. The more customised and significant the export trade transaction is, the higher the significance of risk mitigation,” Mikola explains.The most secure payment method is confirmed documentary credit, which protects the exporter also from risks associated with the buyer’s bank and country. When used appropriately, a documentary credit is a 100% guarantee of receiving the payment. If agreement on a secure payment method cannot be reached with the buyer, the exporter should consider using credit insurance or Finnvera’s export credit guarantee to cover the credit risk.In export trade, the choice of payment method, risk mitigation and the financing-related needs of the buyer and exporter constitute a comprehensive solution that can both improve a company’s competitiveness and prevent credit losses.Read more about the differences between payment methods and other export financing solutions here (in Finnish).

The platform economy requires strong expertise

The platform economy has become a phenomenon. While the space is currently dominated by companies from the United States and Asia, the opportunities presented by the platform economy are also starting to be widely recognised in Europe. The Finnish company Zadaa aims to launch its fashion marketplace in 100 countries within five years according to its CEO Iiro Kormi.Various forecasts suggest that the platform economy will grow to represent a quarter of all business in less than a decade. The surge is being led by giants such as Google, Alibaba and Airbnb, whose platforms attract millions of users every day.The Finnish company Zadaa has already reached the milestone of 150,000 users, in spite of only releasing the beta version of its service two years ago. This year, consumers will use Zadaa’s platform to buy and sell clothing worth more than EUR 10 million. The service also includes product delivery.“The idea for Zadaa was conceived when I saw a Facebook post by a friend of mine. The photo showed a pile of clothes my friend was selling. I wondered why someone would choose to sell their clothes on Facebook,” recalls Iiro Kormi, Founder & CEO of Zadaa.The product development stage of the service took more than a year but, following the launch of its service, Zadaa has grown at a monthly rate of 10–15 per cent. In addition to Finland, the company currently operates in Sweden and Denmark. Germany is next, in April.“The size of the market is EUR 18 billion, but everything comes down to timing. Online shopping has revolutionised the way people buy fashion, and consumers don’t always want to return the clothes they buy. Consumers are also prepared to reveal their clothing size and they want to buy clothes across borders,” Kormi explains.Quick entry into the international markets and sorting out financingManaging the big picture is essential. The idea and the need or, in other words, the community and timing, are key to success. A company like Zadaa also needs a team with expertise in the network business as well as funding.“We systematically built everything to be internationally scalable and in English. You have to start somewhere, but you also need to enter the international markets quickly. We are a very data-driven company. All of our forecasts and decisions are based on data. I know a lot of startups that haven’t used this approach in building their business model,” Kormi says.According to Kormi, data and money go hand in hand. Zadaa is currently wrapping up a financing round of EUR 3–4 million.“We have four founding partners and we are in our third round of financing. We also have a credit limit loan from Finnvera. It is an important part of our financing,” Kormi explains.Zadaa’s strong potential has also been recognised internationally. The US-based financial media Forbes included Kormi in its latest list of young innovators and influencers in the e-commerce category.Focusing on growing scaleup companies in addition to startupsZadaa is one of only a few Finnish success stories in the platform economy. According to Jukka Viitanen, an expert on the development of growth enterprises and innovation platforms, there are only a few dozen companies in Finland that are purely focused on the platform economy. Viitanen is the Chief Executive Officer of Resolute HQ.“You have to tip your hat to those riding the first wave. Very few startups make it. It is typical of the space that new entrants get widespread attention,” Viitanen explains.He says the biggest obstacle to growth for Finnish enterprises is the lack of experts in the network business.Titta Mantila, Vice President and head of the growth and internationalisation team at Finnvera, also expects to see the emergence of more companies specialising in the platform economy.“The platform economy is currently not a particularly visible phenomenon in our work. Studies also indicate that we are still in the nascent stages of this development in Finland and companies are building platforms that are semi-open at most,” Mantila says.She goes on to point out that the enterprises in the platform economy are funded by founders and investors in the early stages. In the product development stage, Business Finland has various options at its disposal. Debt-based financing enters the picture when the company has sufficient equity as well as evidence of its ability to repay its liabilities.“The optimal financing path needs to be built on a case-specific basis. When seeking debt financing, it is important to forecast the development of profitability and cash flow financing. In the worst case, utilising debt financing too early can become an obstacle to subsequent investment. When the company has a finished product or service, or it is already generating turnover, we can participate by providing collateral for bank financing."According to Mantila, a phased financing package is a good model to follow. It involves negotiating a sufficient amount of money from investors and providers of financing. The withdrawal of the funds is divided into multiple phases. The withdrawal of the capital is tied to the development of the company’s business.“There is a lot of buzz around startups right now. Still, it is also important to pay attention to companies that are in the scaleup stage. Their needs are very different compared to startups with regard to financing and expertise, for example,” Mantila says.FACTS: Financing exports by hundreds of millions of euros Last year, Finnvera granted more than EUR 960 million in financing for SMEs and midcaps in response to nearly 19,000 financing applications. Financing granted to growing and internationalising enterprises was approximately 40 per cent of the total, or EUR 385 million. Some 80 per cent of the applicants received a positive decision. In spite of their potential, not all companies seeking robust growth have a long history of financial profitability, in which case their rating might not be adequate. Rating affects the cost and availability of capital. The rule of thumb is that the company must have adequate equity in addition to debt-based financing. The level that is generally considered adequate is 30 per cent. Private investors and venture capital firms invested a total of EUR 383 million in early stage growth companies the year before last. This represented a year-on-year increase of 42 per cent.


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