Finland is a good place to start a business. It has clean, fresh air and water, lakes, rivers, and forests. Finns are hard-working, honest people with a great sense of humor. But being in business in Finland is not easy. So how do you finance your new business in Finland?
Financing your business in Finland is not easy. Finns are very aware of the risk of losing their money, so they are cautious when considering prospective investments. There is no venture capital market as in other European countries. But you can still find financing for your new business in Finland. Here are a few tips:
1) If you have savings to invest, consider starting up a sole proprietorship or a partnership, which requires only small working capital. All you need is a bank account and an accounting system, which can be acquired from computer stores for little money. Banks offer loans for starting up sole proprietorships and partnerships, but their lending requirements are stringent and require good credit history and collateral to secure the loan. The minimum deposit requirement is also high, which is approximately 3,000 euros.
2) If you want to start up a limited liability company, the bank will lend you 50% of the capital, and you will have to provide guarantees for the other 50%. The bank may also require collateral to secure its investment.
3) A short-term loan for new entrepreneurs is also available through the government’s Employment and Economic Development Office (TE Office). This loan, which is distributed by a financing agency called Finnvera, has a low-interest rate (currently 2.8%) and requires no collateral to secure it. However, the TE Office only funds sole proprietorships that are expected to generate fresh employment within two years of opening their doors.
4) If you have equity in your home and other assets, you can start up a limited liability company. These companies do not require collateral or good credit history. They are simple to set up and they offer the most favorable lending terms in Finland. Details of such companies are provided by the Finnish Companies Registration Office (OMC) at the expense of the Finnish tax authorities.
5) If you land a job in Finland, it’s easy to qualify for a loan. A maximum loan amount of 300 thousand euros is available for all new jobs created in Finland each year for three years after your arrival. The loan must be for your personal use. This means, for example, that you pay your office rent or the salary of your employees from the loan proceeds. If you invest some of the loan proceeds in land and buildings, it is possible to obtain a lease on such property. The maximum duration of a lease is five years.
6) If you have investments in shares or other financial instruments (like bonds), they are best combined with a Finnish limited liability company as they offer better protection against loss than other forms of securities.
7) You can also get short-term loans in Finland through commercial banks or through investment funds that offer loans to companies during certain circumstances (for example, when financing equipment purchases).
8) The Government of Finland offers a grant for setting up a new business in the countryside.
9) If you launch a socially responsible venture, you may be eligible for an investment grant: social enterprises may be granted 50% of their investment costs and NGOs 60%. The amount of the grant depends on the amount of equity provided by the founder and/or investors.
10) Many foreign-born people have set up businesses in Finland with assistance from their governments. These ventures are eligible for credit support from, for example, the Migration Service and other government bodies.
11) Finnish banks are not very keen to provide small business loans, but you have many options. You can try private startup loans. Better yet, Finnish banks may be persuaded to do so if you explain your project thoroughly and show good project management skills and management experience in a Finnish company. Borrowers who have excellent credit history tend to be more satisfied with their banking relationship than those who need refinancing.
12) If a loan is necessary, the banks will ask for collateral. Falling house prices are one of the factors that are prompting banks to favor real estate lenders rather than small business lending. But you can still get access to financing for the early stages of your new business in Finland by leasing land and buildings from banks instead of buying them.
13) You can borrow from your bank in Finland, provided that you have a regular place of residence in the country and are familiar with banking practices and procedures.
14) If you’re not a Finn, but want to set up a business in Finland, you can find out if your activities are eligible for assistance under the investment framework agreement between Finland and the European Union. According to this agreement, some foreign entrepreneurs who invest EUR 5 million or more in Finnish companies will be eligible for grants from the Finnish government worth EUR 1 million.
15) The government offers a grant of €100 thousand to businesses that create new jobs, promote export, or cover energy efficiency costs. This grant is available to businesses with a turnover of less than €30 million.
16) If you want to set up a business with more than ten employees, the Ministry of Employment and the Economy will offer support for your project. This can be in the form of investment grants, financial support, and training.
17) If you’re a foreign entrepreneur and have a new business idea, there are various organizations you can contact for information on financing your new venture in Finland. You can also find out more about funding opportunities available at Enterprise Institutions (ETYKES) or The Finland-Swedish Enterprise Agency (FINNVERA).
No matter what type of financing you choose, the most important thing to do is prepare properly and be persistent. Successful entrepreneurs in Finland are those who have gained formal business training, who have worked as employees in companies, and who have earned good credit history with their previous jobs.
Financing your new business in Finland is not easy. You can do it, but it will take time. Lengthy conversations and persistence are essential tools for finding credit for your new business in Finland.