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Executive Vice President’s review: The crisis year multiplied demand for financing – ability to react quickly proved indispensable

Finnveran liiketoimintajohtaja Juuso Heinilä
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The pandemic could be seen very quickly in enterprises’ demand for financing in March. We responded to this demand by swiftly adjusting our operating models accordingly. The availability of financing to enterprises remained good, and cooperation between Finnvera and other providers of financing functioned well. The raising of our financing authorisation ensured the sufficiency of financing. Financing granted by us totalled approximately EUR 1.7 billion.

The first sectors to be hit by the effects of the coronavirus pandemic were industry, which suffered from a shortage of components, and small businesses, especially in tourism, accommodation and restaurant services, when official measures restricted business operations. The raising of Finnvera’s authorisation to grant domestic financing to EUR 12 billion was reassuring news for the market, indicating that there will be a sufficient amount of Finnvera’s financing available.

We agreed on new operating methods that enabled us to respond to the needs of enterprises. We introduced the option of an instalment-free period for all enterprises affected by the coronavirus crisis. As a rule, the guarantee coverage was defined at 80 per cent instead of the previous 50 per cent. We chose the SME Guarantee as the maintool for our financing and changed its product terms and conditions. Under the terms and conditions agreed with banks, we built a so-called fast track guarantee model, which made it possible to grant an 80 per cent guarantee for loans granted by banks, up to EUR 1 million. We reduced the pricing of our guarantees. 

Approximately 23,700 financing and change decisions were made in 2020.

As a counter-cyclical operator, we increased our risk-taking in line with our mission. We were able to serve enterprises in the unprecedented crisis quickly and without major backlogs. Approximately 23,700 financing and change decisions were made, double as many as in the previous year. The result of the SME and midcap business in 2020 stood at EUR 87 million (EUR 17 million).

The financing system and cooperation  worked for enterprises’ benefit 

In financial crises, it is typical that the financing system does not work, which exacerbates the effects of the crisis. Now the financing system proved its functionality and lending could be secured. This required extensive and efficient internal cooperation between the client interface, service development and different units. Our personnel’s flexibility made development work, rapid changes and client service possible, especially in the spring. Indeed, I would like to thank our personnel for their commitment and expertise.

There was also close and fruitful cooperation with our partners and stakeholders. We had an active dialogue with banks, for which we have received a great deal of praise. The channels of communication were also open to enterprise organisations, for instance, and we were able to make agile changes to respond to messages from business life. 

Even during the exceptional year, our client satisfaction remained high, and the average NPS rating in the SME and midcap business was 62. 

It is important to start seeking growth early enough  

The crisis resilience of Finnish enterprises proved to be good during the year, and they were able to adjust their operations. In order to diversify the financing offering, we introduced a working capital loan specifically targeted at the needs arising from the coronavirus crisis.

Working coronavirus vaccines restored the confidence in overcoming the crisis. Although our strategy focused on helping viable enterprises overcome the crisis, we shifted our focus to financing the future growth as the year drew to a close. Financing requires Finnvera’s involvement as increased regulatory requirements are reflected in banks’ cautious attitude. Finnvera’s junior loan, the Growth Loan, improves enterprises’ opportunities to apply for external financing. 

It is vital that enterprises have the courage to start seeking growth early enough. This also requires courage from providers of financing, and Finnvera wants to be involved as an enabler. 

Corporate structure renewal is one of the drivers of growth. Transfers of ownership will again be one of the focus areas in Finnvera’s financing. There are also high expectations associated with boosting SMEs’ export trade. In 2020, Finnvera granted twice as many export credit guarantees to SMEs as in the previous year. With the special permission, credit insurance could also be granted for exports to EU Member States and Western industrial countries. Hopefully, SMEs will also be more familiar with export financing solutions. 

To ensure the growth of SMEs’ exports, Finnvera started preparing direct lending for smaller export transactions of less than EUR 20 million. On the basis of our study, there is a clear market failure in this kind of financing after the banks withdrew from it. Direct financing of small export transactions requires an amendment to the legislation, but even before that, we can boost growth with existing products.

Juuso Heinilä, Executive Vice President, SME and midcap business