Financing operations

Ultimately, Finnvera operates under the aegis of the State and is able to assume greater credit risk than private financial institutions. In accordance with the Government's commitment from 2018 the State will compensate 50 per cent of the credit losses resulting from financing granted to SME and midcap enterprises. Losses resulting from these operations and remaining after the State’s compensation for credit losses are covered from the reserve for domestic operations on the balance sheet. Due to the coronavirus pandemic, the State’s loss compensation was raised from 50 per cent to 80 per cent retrospectively from the beginning of 2020.

Credit risks are shared between Finnvera and other providers of financing. Loans and guarantees are almost always granted without full collateral. Financing is based on the assessment of risks and the enterprise’s potential for success and on the effectiveness of financing.

The financing offered by Finnvera is priced on the basis of the assessment of the recipient’s business risks and the collateral available. In recent years, Finnvera has increased its risk-taking both in the financing of companies’ domestic operations and in the financing of exports. Credit losses incurred by Finnvera annually have been about 2 to 3.5 per cent of the total exposure.

The pricing of export credit guarantees is based on the risk category reflecting the relevant credit risk. Any export financing losses are covered primarily from profits arisen in previous years that have been transferred to the reserve for export credit guarantee and special guarantee operations on Finnvera’s balance sheet.

If the enterprise’s normal development measures do not produce the desired results, it is justified to consult outside professionals. Finnvera’s own turnaround experts assist clients in seeking help.

In the best of cases, turnaround means that the enterprise solves its financial difficulties and continues its operations profitably and competitively. For Finnvera, successful turnaround means smaller credit losses. Rapid and expert turnaround is also useful for society: it can help the company to avoid the possibly impending bankruptcy and loss of jobs.

Technically, turnaround is generally implemented using either voluntary turnaround or official restructuring, as referred to in the Restructuring of Enterprises Act. Sometimes the only alternative remaining is bankruptcy, but even in these cases the viable part of the business can often be sold to a new owner.