How the EIB Group supports more than a thousand small companies in Finland

Jukka Luukkanen, head of the EIB Helsinki office

“I used to be a professional player at FC Inter Turku. When I retired, I started working at a company that developed software to manage the rentals and storage of VHS tapes at video clubs. One day, a hospital asked us if we could develop similar software for tissue banking,” says Petteri Viljanen.

Tissue banking is the collection and analysis of human tissue samples for hospitals and doctors. Viljanen is co-founder and CEO of BCB Medical, one of the SMEs in Finland that has received financing backed by the European Investment Fund, part of the European Investment Bank Group.

“One thing led to another and, well, here we are today,” says Petteri.

One thing leading to another also sums up well how the EIB Group supports SMEs. We do it indirectly: the EIB and the EIF provide fund investments, risk-sharing products, and funding to Finnish intermediaries, who then finance SME-s. More than a thousand Finnish SMEs have benefited this way to date.

Sharing investment

In the case of Petteri Viljanen’s BCB Medical, this intermediary was Standout Capital, which made an important investment in the company in 2017. Standout Capital is a private equity firm backed by the EIF, which specialises in investment in the growth phase of technological companies.

Another “thing” leading to this investment: the EU’s Investment Plan for Europe. Part of this plan, the European Fund for Strategic Investments (EFSI) enables the EIB Group to undertake more innovative and high-risk financing. In Finland, this meant EIF financing for SMEs through local financial institutions like Standout Capital, but also direct EIB lending to fund innovative companies. So far, approved financing under EFSI in Finland amounts to €2 billion and is set to trigger €7.2 billion in additional investments.

Standout Capital is one of 25 equity fund transactions totalling €450 million the EIF has done in Finland. Just this year, the EIF has signed first two co-investment agreements with Finnish business angels under the European Angels Fund S.C.A. SICAR - Finland. This fund is advised by the EIF and aims at providing equity for co-investments to business angels and other non-institutional investors to finance innovative or technology oriented companies.

Sharing risks in small companies

Additionally, the EIB Group supports financing for SMEs through risk-sharing agreements. OP, Nordea, Savings Bank Group, Säästöpankkien Keskuspankki, OMA SP and Aktia have all been engaged as intermediaries under a scheme called the SME Initiative, and almost €400 million has by now been allocated.

This risk-sharing agreement, supported by the Finnish government and the European Commission, will enable these banks to lend more to SMEs on advantageous terms, such as reduced interest rates and friendlier collateral requirements. InnovFin SME guarantee is another risk-sharing product provided by the EIF. In Finland, OP, Nordea and ålandsbanken have operational InnovFin SME guarantee programmes and SMEs applying for a loan can just turn to these banks directly.

SMEs are also supported through indirect programmes like securitisation. And, finally, SMEs are also supported through the EIB’s dedicated loans to commercial banks. For example, OMA SP is currently giving out loans to SMEs in Finland based on one such intermediated loan. After a record year (€2.2 billion) of 2016, EIB financing in Finland amounted to more than €1.9 billion in 2018, focusing on helping smaller projects than in previous years.

So, if you are planning to retire from playing football or hockey and have a business idea for an SME, you should look up some of the funds and the banks that the EIB Group is supporting.

This article was first published in a bi-annual magazine of the Finnish Ministry of Economy & Employment, in Finnish.