Since 2014 the European Investment Bank (EIB) has increasingly offered financing to Finnish growth companies utilizing several different instruments.
One of these financing instruments is a bilateral loan, hereafter called EIB financing, that is offered directly to innovative growth companies. So far, these loans have been granted to approximately a dozen Finnish growth companies and several companies are currently in different stages of the loan application process. The financing is offered as a part of the Horizon 2020 – program, which is EU’s research and innovation financing program.
Pursuant to the loan agreements signed to date, Finnish growth companies have been granted an aggregate of approximately 200 million Euros of EIB financing, individual loans being between 8.5 and 25 million Euros. At the same time, Finnish growth companies have in years 2015-2017 raised approximately 680 million Euros of new capital from venture capital investors and corporate VC’s. It is safe to say that EIB financing has a considerable role as a growth booster for Finnish growth companies.
EIB financing has characteristics of both debt and equity. Its structure also includes some features of venture debt. In parallel, the loan agreements themselves have much in common with traditional project financing. Even if EIB’s financing solution contains just a few new elements, the instrument as a whole is something new at least for Finnish growth companies. In addition, the process of applying for and the documentation relating to EIB financing is relatively burdensome compared to for example early-stage financing rounds.
As an institution and market player EIB is different from traditional commercial banks; in addition to business reasons, it is also driven partially by different values and the prevailing political atmosphere in Europe. This is reflected also in EIB’s procedures related to, for example, risk tolerance and decision-making processes. From the perspective of the growth companies applying for funding this might manifest itself as a long process but on the other hand also as a real commitment from EIB to support growth companies and to create new European success stories.
All in all, EIB financing is a fairly new and interesting addition to the financing toolbox of Finnish growth companies. We at Fondia have had the opportunity to follow this development from a vantage point while acting as legal advisor and providing support to our customers in the process in numerous EIB financing arrangements.