1 Competitive Regions Shaping best practice Finnvera’s soft loan schemes for SMEs Sheffield 9-10 October Pauli Tiainen Finnvera plc

2 mA specialized financing company owned by the state of Finland and operating in the whole of Finland –grants risk financing to SMEs (e.g. loans and guarantees) –promotes the exports and internationalization of enterprises mKey figures – clients –two head offices and 16 regional offices –personnel of about 400 –share capital € 188 million –balance sheet total € 1, 53 billion –total liabilities € 5,7 billion

3 Objectives of Finnvera’s ERDF- co- financing mDiversification of financing instruments used in the ERDF-cofinancing in Finland –reduction of direct subsidies mIntensification of the effects of the Objective 1 and 2 programmes on the development of SMEs –new jobs –new enterprises –new investments –overall development of SMEs mIncrease in risk-taking especially in the Objective 1 areas

4 Finnvera’s ERDF-cofinanced schemes and the ERDF’s participation mMicro-financing scheme –micro-enterprise loans –women entrepreneur loans mEntrepreneur loan scheme –entrepreneur loans mGrowth financing scheme –investment and working capital loans mThe ERDF-cofinancing is used for –interest subsidies (all schemes) and –compensation for credit losses (growth financing scheme)

5 Interest subsidies 1 mThe Objective 1 areas –micro-financing and entrepreneur loan schemes (interest subsidies are paid throughout the loan period) both the ERDF and the state of Finland 2,5% –investment and working capital loans (interest subsidies are paid in the first two years) national assisted area/category 1 both the ERDF and the state of Finland 2% national assisted area/category 2 both the ERDF and the state of Finland 1,8%

6 Interest subsidies 2 mThe Objective 2 areas and Urban areas –micro-financing and entrepreneur loan schemes (interest subsidies are paid throughout the loan period) the ERDF 2% and the state of Finland 3% (these schemes are not used in the Urban areas) –investment and working capital loans (interest subsidies are paid in the first two years) national assisted area/category 3 or non- assisted the ERDF 0,7% and the state of Finland 1,0% national assisted area/category 2 the ERDF 1,5% and the state of Finland 2,1%

7 Interest subsidies 3 Intermediation of interest subsidies mThe phasing-out areas (Transitional support) –micro- financing and entrepreneur loan schemes (interest subsidies are paid throughout the loan period) the ERDF 2% and the state of Finland 3% –growth financing scheme is not used in these areas mFinnvera intermediates the above-mentioned interest subsidies to the enterprises by granting the loans at decreased interest rates in which the interest subsidies are fully taken into account

8 An example of an investment and working capital loan/Objective 1 area mInvestments € 1million and working capital € 0,5 million (total capital requirement € 1,5 million) mFinancing –Finnvera € 0,5 million –Bank € 0,4 million –TE- centre (cash grant) € 0,2 million –Own financing€ 0,4 million mFinnvera’s loan (maturity 6 years, two years without amortization) –rate of interest (first two years) EB6+ 0,9+2,2%- (2%+2%) –rate of interest (after two years) EB6+0,9+2,2% –subsidy element calculated as a grant € (2,4% of the investment)

9 Compensation for credit losses mCompensation for Finnvera’s credit losses only concerns the growth financing scheme mCompensation in the Objective 1 areas –the ERDF40% –the state of Finland40% –(Finnvera20%) mCompensation in the Objective 2 areas –the ERDF27% –the state of Finland 40% –(Finnvera33%)

10 Some key figures concerning Finnvera’s ERDF-cofinanced loans granted in the period mLoans granted and the share the ERDF- and state financing bound to interest subsidies and to compensation for credit losses (million €) Loans Financing bound ERDF State Total mInvest.+ working capital loans 181,3 11,0 12,0 23,0 mMicro-loans 29,4 2,3 2,9 5,2 mWomen entrepreneur loans 17,5 1,4 1,7 3,1 mEntrepreneur loans 15,6 2,6 3,3 5,9 mTotal 243,8 17,3 19,9 37,2

11 Some indicators concerning Finnvera’s ERDF-cofinanced loans granted mThe figures concern both the Objective 1 and 2 programmes (period ) –New jobs (total)6 599 –New jobs for women2 493 –Safeguarded jobs (total)2 814 –Safeguarded jobs for women 782 –New enterprises (total)1 744 –New enterprises established by women 766 –Equal opportunities projects –ERDF- and state- cofinancing (€)/job5 640