The business idea is born, the business plan is almost perfected, the momentum is on, the necessary permits have been obtained and the practical steps should begin! But how to finance a limited company in Finland if you don’t have enough money in your bank account? We give you tips on where to look for funding for your company.
The cost of setting up a limited company itself is not prohibitive (€380 or €275 depending on whether you register on paper or online). However, external funding is often needed to get going. So, as a start-up entrepreneur, where can you look for funding in addition to your own capital? In fact, there are several places! Also check out our info on how to set up an ltd. company in Finland!
Equity capital
You don’t necessarily need money to set up a limited company in Finland. You can set up a limited company without a fixed amount of share capital invested in the company. However, we recommend that you also invest your own money in the company. You can do this, for example, by investing in a free equity fund.
Start-up money
The start-up money granted by the TE Office is not really a form of funding, but a support to help entrepreneurs secure their livelihood during the start-up phase of their business. In 2022, the start-up allowance will amount to €34.50 per day for five days per week, i.e. around €700 per month, and will be paid directly to the entrepreneur himself, thus becoming taxable income for the entrepreneur.
The start-up allowance is available for up to 12 months and requires that you are:
- unemployed
- or in transition from paid employment to full-time entrepreneurship
- or you are already working as a part-time entrepreneur and will become a full-time entrepreneur as your business expands.
You must also be able to demonstrate, for example through a business plan, that the business you are setting up has the capacity to guarantee your future livelihood. You will also have to demonstrate profitability, and that you business has not started in full swing before the start-up grant was awarded. Previous payment defaults, unpaid taxes or other statutory payments may disqualify you from receiving start-up money.
Business development grant
The Centres for Economic Development, Transport and the Environment, or ELY Centres as they are better known, provide grants for the creation of new businesses, i.e. money for setting up and developing a limited company. To apply for a development grant, you must have a project plan that includes the measures you plan to take, including timelines and costs, and you must define the desired results of the project. The project must be relevant to the development of your business. The level of aid is determined by the size of the company
and geographical location, with a focus on small businesses.
Financing options offered by Finnvera
You’ve probably heard of Finnvera, but you may not have a clear idea of what it is and what it does. Finnvera is owned by the Finnish government and specialises in how to finance a limited company in Finland. For example, financing a start-up business, of all things!
An entrepreneurial loan is granted directly to the entrepreneur himself, not to the company. It’s granted to enable, for example, the acquisition of a business or the financing of share capital. To qualify for an entrepreneurial loan, a 20% co-payment is required, and the applicant’s share in the company’s share capital must rise to more than 20% as a result of the entrepreneurial loan.
A Finnvera loan is granted directly to a company with a minimum amount of €30 000. The repayment period of usually around 3-15 years. This depends on the terms of the agreement. A Finnvera loan can be used more freely than an entrepreneurial loan.
For example:
- to invest in machinery or equipment
- to finance ownership restructuring
- to finance environmental and energy projects
- to finance working capital needs.
The loan is conditional on a turnover of less than EUR 50 million and fewer than 250 employees. In addition to the above, the company must also pass a business survey carried out by Finnvera.
In addition to financing, Finnvera also offers guarantees to make it easier to apply for a loan from a bank. At Finnvera, you can apply not only for an initial guarantee for your loan, but also for an entrepreneur loan or an actual Finnvera loan.
Bank loans
It’s hard to run out of money and often the first thing a start-up does is to apply for a loan from a bank. However, obtaining a loan is not always a foregone conclusion unless you have sufficient collateral for the loan you are seeking. At this point, it is worth remembering that Finnvera offers initial guarantees for loans in precisely such cases, as already mentioned above. Despite Finnvera’s initial guarantee, there may be other obstacles to obtaining a loan – the bank checks the creditworthiness of the company or entrepreneur and the existing collateral before granting the loan.
Business angels
How to finance a limited company in Finland with business angels? The term refers to an investment by an individual in a company with which he or she has no family ties and which is a potential growth company. Sort of like the godfather of your business. An angel investor actively seeks to influence the success of their investment, and angel investments are mainly made in the early growth stages of a company. It can also be more than just a pile of cash – time, knowledge, contacts and networks for which you cannot put a price tag on. Mentoring and angel investor contacts can often be to gain growth. Even more important than the investment itself. An angel investor is likely to look more closely at the current state of your business. Check out Fiban’s website!
Private equity
Venture capital is a great way to accelerate the growth of your business and raise additional finance. The term venture capital refers to an investment in a company by a professional investor. Usually, in return for the investment, the investor receives shares in your company. As well as bringing money into your business, of course, it also brings the expertise and contacts of a venture capitalist. The venture capitalist is not a permanent owner, but seeks to exit the company according to a pre-agreed plan. The investor’s aim is, of course, to get the best possible return on the money invested. The venture capitalist therefore takes the same risk as other shareholders and is rewarded according to how well the company performs. Find out more about private equity on the Private Equity Investors Association website.
So what is your choice on how to finance a limited company in Finland?
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