Finnvera’s guarantee coverage can be up to 90 per cent if the arrangement of financing requires
Finnvera makes preparations for various financing needs arising during the coronavirus pandemic by increasing its guarantee coverage to a maximum of 90 per cent. As a rule, Finnvera’s guarantee coverage will be 80 per cent in the future, too. However, a guarantee of up to 90 per cent can be granted for banks’ promissory notes if the arrangement of financing for an SME absolutely requires this.
To ensure that enterprises can fully benefit from the advantages of the higher guarantee coverage, Finnvera also sets a price ceiling for the bank loan it guarantees and limits the maximum margin interest and service fee that the bank collects for the loan.
“The most important thing to remember is that the enterprise must still first contact its own bank in any financing needs. According to our estimate, also from now on, most enterprises will receive bank financing with lower guarantee coverages and, as a result, it is not necessary to increase Finnvera’s guarantee coverage globally to 90 per cent. In addition, such arrangements always increase the enterprise’s financing costs,” says Juuso Heinilä, Executive Vice President at Finnvera.
In the granting of the 90 per cent guarantee, the new COVID-19 State aid is used for calculation related to the EU rules on State aid. This in turn sets conditions for granting the higher guarantee. Finnvera must submit information to the European Commission about all enterprises that have been granted a 90 per cent guarantee. The Commission will publish this information on its website. In its own operations, Finnvera applies a confidentiality regulation, according to which client information is not public.
Applications for the higher guarantee coverage can be submitted immediately and the higher guarantee coverage will be available until the end of 2020.
Requirements for the higher guarantee coverage
The higher 90 per cent guarantee coverage can be used if the loan applicant is an SME that needs financing for investments or working capital and if financing could not be arranged without the higher guarantee coverage.
The guarantee can be given for a promissory note of a minimum of EUR 50,000 granted by a bank, with a maximum loan period of 6 years and a maximum instalment-free period of 12 months. The loan may be at the maximum double the amount of the enterprise’s salary expenses in 2019 or at the maximum 25 per cent of the enterprise’s turnover in 2019.
The promissory note can be granted both for investments and as working capital financing. The enterprise cannot use the loan to be guaranteed as payment for existing liabilities to the bank or as deposit security.
The higher guarantee coverage is used on the basis of a case-by-case discretion and Finnvera requires guarantee security in line with its normal credit policy.
The bank’s maximum margin interest for the loan is 2% p. a. and the maximum service fee is 1% of the loan capital. Loan costs may not be increased without Finnvera’s consent. The creditor gives a maximum instalment-free period of 12 months for all financing it has previously granted to the borrower by extending the loan period and extends the limit validity by a minimum of 12 months. Funds received may not be used as payment for liabilities granted to the borrower by the creditor, pledged or otherwise be given as security or loaned.
Finnvera’s maximum guarantee commission for a 90 per cent guarantee is 2.55% p. a. depending on the enterprise’s risk category and the loan period. Finnvera’s guarantee covers 90 per cent of the risk of the bank loan and Finnvera must apply appropriate pricing to cover its share of credit losses.
In the SME Guarantee, Finnvera's guarantee coverage is still fixed at 80 per cent, and in the Start Guarantee at the most 80 per cent.
Juuso Heinilä, Executive Vice President, Finnvera, tel. +358 29 460 2576
Up-to-date information about Finnvera’s financing services during the coronavirus pandemic can be found at finnvera.fi/eng/corona.