EMCC European Monitoring Centre on Change

Entrepreneurship related measures by the Credit and Export Guarantee Fund KredEx

Estonia
Phase: Anticipation
Type:
  • Access to finance
  • Fostering innovation
  • Start-up support
  • Support of companies' growth
  • Support of internationalisation
  • Support of SMEs
Sidst ændret: 14 August, 2020
Lokalt navn:

KredExi ettevõtluse valdkonna meetmed

Engelsk navn:

Entrepreneurship related measures by the Credit and Export Guarantee Fund KredEx

Coverage/Eligibility

There are five main measures in the package, which have slightly different eligibility criteria due to the nature of the measures. The start-up loan is targeted at small and medium enterprises (SMEs) and self-employed persons that are starting a company, or have been active for up to three years. A business loan guarantee is not limited to a particular type of enterprise, although some specific areas of activity are excluded (for example primary production of agricultural products, fishery and aquaculture, or forest management;  production, processing or marketing of tobacco or related products). The subordinated loans (capital, industry and export loans) are meant for sustainable companies that are growth-oriented, but which banks are not ready to finance due to low rates of self-financing, operating in a 'risky' sector or insufficient collateral.

Main characteristics

KredEx provides five main entrepreneurship related measures. Loan guarantees of KredEx help companies to develop and increase their possibilities to obtain a loan from the bank. The loans can finance investments and working capital of starting businesses, enabling fast growth and development.

The first measure is a start-up loan (stardilaen). This  will help a company that has just started out, or has a short credit history, and whose collateral assets are either difficult to estimate or are not sufficient for a bank loan. The maximum amount of the loan is €100,000 and the maximum term is five years. Eligible companies are maximum three years old and with maximum 250 employees. The entrepreneur is responsible for the loan: the joint and several liabilities correspond to 25% of the loan amount. In case of guarantee, KredEx will take secondary responsibility.  The guarantee of KredEx is 75% of the loan amount not returned to the bank. If a business plan fails and the entrepreneurs are not able to manage the loan, their surety will be used before other steps are taken.

The second measure is a business loan guarantee (laenukäendus). This enables a guarantee of investment and working capital loans, leasing transactions and bank guarantees. KredEx prefers to guarantee projects that result in a company expanding, with new jobs being created or a growth in export. The extent of the KredEx guarantee is up to 80% of the loan amount (for construction companies up to 60%) but not more than €5 million in case of SMEs and €1.5 million in case of large companies.

The third measures is a capital loan (kapitalilaen). This subordinated loan is meant for sustainable companies that are growth-oriented and which banks are not prepared  to finance due to their low rate of self-financing, operating in a 'risky' sector or having insufficient collateral. KredEx provides capital for the entrepreneur to use. Subordinated loans will conditionally enhance an enterprise’s equity capital which, in turn, enables the enterprise to borrow additional amounts and to develop more quickly. In addition to providing financing that would be otherwise unavailable, the KredEx does not interfere in the management of the enterprise, unlike the case with risk capital funds. The maximum amount of the loan is €2 million, but it cannot exceed the company’s equity at the moment of disbursement of the loan. The loan term is generally 3-5 years, but can be up to 10 years.

The fourth measure is industry loan (tööstuslaen). It is designed for export-oriented enterprises in the areas of processing industry, mining industry, production, transfer and distribution of electrical energy and waste processing and disposal, investing into machines and devices. Technology loan helps if a bank loan or leasing is used for an investment, but the entrepreneur lacks the required capital for self-financing. The amount of the loan can be up to €2 million, but not more than 67% of the project cost with the term of up to 10 years.

The fifth measure is an export loan (ekspordilaen). It is meant for companies wishing to finance large-scale export transactions of goods manufactured in Estonia. The export loan helps if a company wishes to offer a long payment term to a foreign buyer, pay a credit insurance premium or finance the production of goods to be sold to a foreign buyer. The maximum amount of the loan is €3 million with the term of up to 10 years.

Funding

  • National funds
  • European funds
  • European Funds (ESF)
  • European Funds (ERDF)

Involved actors

National government
KredEx (implementation).
Anden
ESF, ERDF (funding).

Effectiveness

In 2016, KredEx guaranteed and financed a total of 430 enterprises in the amount of €95.6 million (44% more compared to 2015). The KredEx support made it possible for enterprises to include additional financing from banks and KredEx in the amount of €173.1 (54% more compared to 2015). 868  (43% more) new jobs were planned to be created with the support of KedEx. The highest share of loan and guarantees were used in construction (13.9%  in 2016, 6.9% in 2015), and professional,  wholesale and retail trade (7.3% in 2016, 9.8% in 2015).

In 2019, KredEx guaranteed and financed a total of 411 enterprises in the amount of €77.1 million, which made it possible for the enterprises to include additional financing from bank in the amount of €150.3 million. As a result, 208 new jobs were planned to be created. The highest share of guarantees were used in construction (36%) and in wood industry (13%) sectors.

According to the study 'Mid-term appraisal of business and innovation policies' (Jaaksoo et al, 2012) that included 751 enterprises that have used KredEx measures, the measures have had rather positive impact. On average, the sales revenue increased by €188,000 per company; the share of export revenue increased on average by 6 percentage points; the business income increased by 76%. Overall the enterprises who had used the KredEx measures grew faster than other companies in Estonia averagely.

Strengths

Measures help companies that have difficulties accessing finances, thus supporting development, growth and job creation. According to the study 'Mid-term appraisal of business and innovation policies' (Jaaksoo et al, 2012), the companies consider KredEx measures to be effective and supported the creation of new jobs - on average 2.4 new jobs per company were created (among those who created new jobs).

Weaknesses

The main recommendation by the companies from the study 'Mid-term appraisal of business and innovation policies' (Jaaksoo et al, 2012) were that the companies wish to encounter less bureaucracy when applying for a grant and when reporting back; the proportion of grants in financing should be greater; the limit of the group is too low; export grants should be given to smaller companies as well; the consultants should be more aware of what is happening in the real economy; Enterprise Estonia should demand more concrete results. However, no newer studies to estimate the current weaknesses or improvement have been conducted.

 

 

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