At the prestigious Åre Business Forum, where members of trade and industry, economic policy-makers and entrepreneurs gather to discuss new business opportunities, Anna-Karin Jatko launched a new solution for the needs of banks in covering risk and capital adequacy in export transactions for innovative and growing companies. This solution has been developed by EKN in partnership with the EIF (European Investment Fund) to create more robust credit guarantees for such companies in seeking entry into export markets.
“It’s our job to ensure the banks can help companies grow. So in partnership with the EIF, EKN is launching this offer to cover 80 per cent of risk. When helping clients to internationalise their innovative business solutions, the banks now only need to take 20 per cent of the risk themselves” said Anna-Karin Jatko.
Exporting often means additional costs, such as funding for stock, recruitment, new machinery and marketing campaigns, which companies must finance. Yet when companies need to borrow money for such export initiatives, the requirements for risk cover and capital adequacy often pose a challenge to banks.
With this new solution, when a bank lends capital, EKN and the EIF each cover 40 per cent of the risk. This applies to both working capital credits and investment credits. Compared to similar existing EKN solutions where the banks take 50 per cent, this solution means they only need to take 20 per cent, presenting considerably lower risk.
“All parties gain. With EKN tasked to help more small and medium-sized companies enter the export markets, our new collaboration with the EIF and the banks means we can really make this happen even more” added Anna-Karin Jatko at the Åre Business Forum.
The new solution is earmarked to give small and medium-sized companies (with fewer than 500 employees) greater opportunities for funding on better terms. Support is conditional on it being given to innovative companies that invest in new products, markets and clients. As Anna-Karin Jatko points out, there are many Swedish companies meeting those criteria today.
“Together with the EIF and the banks, we will be making transactions up to a value of SEK 2.5 billion possible. This will provide great opportunities for bank lending to new and innovative businesses.
“It’s a fantastic opportunity. This funding solution has a term of up to ten years; it enables us to hook up with the client over a long period. We are able to provide a completely different form of support. The fact that EKN’s products are also available to subcontractors supplying exporting companies provides an opportunity for many small-sized companies. If we can facilitate their growth, then that’s fantastic. The market today is a global one, for many small-sized companies too.”
“In the past we’ve had a risk cover of 50 per cent. Now we’re getting a further 30 per cent. We’re changing up a gear in terms of client funding. We now need to include EKN in our toolbox, and to make this happen EKN needs to make the function it will have for us as clear as possible. I feel that EKN needs to go a bit further in approaching the banks if this new support programme is to be made available to all. This is a solution companies need. Now all we need is the specific know-how.”
“This solution seems really good. It means greater risk cover than before. It helps the client and it helps us as a bank to lend more money. Our clients need risk capital. Many companies export and many of them have subcontractors. So this programme is offering assistance to many more clients than the support programmes and funding solutions in place to date.”
“This support programme means that we as a bank can support new, innovative companies. We come across many good ideas that have potential but so often the risk capital is lacking. I see EKN as a safe partner who can also provide further checks for us. We make our credit assessment, and EKN make theirs. We are getting a competent partner and an extra sounding board.”
“I am very much in favour of this. Sweden is a small nation, and we depend on exports to succeed. Swedish exports have now got going again since the financial crisis of 2008, and we need to continue our efforts to ensure things go in the right direction. Right now we are looking at a political environment with protectionist elements on a global scale, which is why it is essential that we offer more in the way of support and do what we can to promote export opportunities.”