Business Loans in Nordic Countries
The Nordic countries are generally related to Denmark, Finland, Iceland, Norway, and Sweden, including their associated territories (Greenland, the Faroe Islands, and the Aland Islands). The term “Nordic countries” has been widely used since the advent of Foreningen Norden.
Compared to some other economic regions of the world, only a small number of commercial banks operate in the Scandinavian Economic Zone, and few are mainly oriented towards corporate/business banking.
However, there are several different choices to make some objective ranking relevant. We believe that one of the best ways to compare banks is to see what clients say about their services.
It is an excellent way to compare and evaluate the actual performance of a bank. One area under the microscope is corporate banking, where banks rank between 1 and 100 according to the degree of business customer satisfaction.
Let’s take a look at business loans in the main Nordic countries.
Business Loans In Denmark
The World Bank has been calling Denmark the best country for business in Europe for seven years in a row, which shows the excellent business environment that this Scandinavian country has managed to create.
Denmark has been ranked 3rd in the World Bank’s “Ease of Doing Business Index,” which puts it in front of all other Scandinavian and Nordic countries.
However, not everything is straightforward. It is much harder to get business loans or other credit to Danish entrepreneurs and companies than many other top-ranked countries in the index.
It is much easier to get a business loan in Denmark than in any of their Nordic neighbors, Norway or Sweden.
Getting a bank loan for your business can be quite a hassle; Danish banks are usually not prepared to lend to new firms or startup projects because they think it is high risk with low rewards.
If you want to apply for a bank loan, you should make sure that you are well prepared and can present an excellent business plan.
There are other alternatives if your application is not successful. A sufficient number of small credit companies in Denmark offer various business financing options.
Independent credit companies with business propositions are mainly focused on small and medium-sized businesses that need capital.
Another constantly growing market is the market for equal credit. There are several crowdfunding business financing platforms in Denmark.
Business Loans In Finland
Finnish banks have become increasingly cautious in lending to Finnish startups, entrepreneurs, and small and medium-sized enterprises in recent years.
Ironically, such enterprises tend to need financial capital the most. Banks that reject credit applications could be a real problem if there were no alternatives. Fortunately, Finland has a growing number of financial companies offering small business loans, especially for startups.
Compared to other Nordic countries, Finland has a reasonably large alternative financial market, outperforming others in terms of both per capita volume and total volume (almost twice as large as Denmark’s second-largest Scandinavian alternative financial sector).
The crowdfunding market is regulated and governed by the Finnish crowdfunding law (734/2016) since 2016, this law has helped this sector to develop, and it is expected to continue to grow.
Currently, the most common loans in Finland are consumer loans. However, some financial companies, such as Fellow Finance, are also promoting business loans.
Business Loans In Norway
The Financial landscape of Norway is unique. Norway is mainly known as an oil and fish rich country with low levels of corruption and high social welfare. However, there is also a controversial view of Norway as a notorious country with one of the most demanding tax systems in the world.
Both statements are indeed true, and given these first opposing views of Norway, you may wonder what it’s like to do business in Norway.
Doing Business In Norway
If you can withstand the heavy tax burden and are not easily shocked by the fact that the country is not a member of the EU, Norway is indeed a magnificent country to do business in.
There are around 35,000 new businesses registered in Norway every year, which is a good figure considering the rather small population of around five million people.
If you are afraid of high taxes, you should take into account that the Norwegian government recently proposed that the corporate tax rate should be reduced from 23% to 22% in 2019.
If you run a small technology company, you may consider moving out of the Oslo urban areas, as Norway has special tax zones with much lower taxes on companies.
Getting Hold Of Business Financing
If you have to single out one thing as the most difficult task, like a startup or small and medium-sized companies established in Norway, it must be a business loan from a Norwegian bank.
Most banks refuse to give loans to small businesses, and this process can be very frustrating for young entrepreneurs. In general, getting a business loan in Norway is not easy, and there are very few independent credit companies offering business financing.
Compared to their brothers from Scandinavia, there is still a lot to do in Norway before crowdfunding can become a real alternative financing method.
Many soldiers and newly established companies have to take personal loans or lend money from relatives or friends.
Applying For A Business Loan In Norway
Many companies need to know the conditions they must meet to obtain a loan or credit in the startup and growth phase. When granting a loan, banks are primarily interested in two things:
- The ability of the company to service the debt
- Adequate collateral in case the company does not service its debt. Also, the bank should know as much as possible about the project for which the loan is required.
The bank must be sure that it will be repaid for you to qualify for a loan. The solvency of a company, i.e., its ability to service debt, depends on the amount of cash it has, or on the readily available funds it has.
Therefore, the bank will ask about the company’s current liquidity position as well as its cash flow prospects.
Collateral is generally an asset that the lender is entitled to collect if it is not repaid. There are many forms of collateral, ranging from company assets to warranties and real estate. Contact your bank to find out what kind of collateral may be relevant to your business.
Business Loans In Sweden
Getting a normal bank loan as a Swedish startup or a new small or medium-sized company is usually very difficult.
If you do not know any influential people in the bank or do not have any influential business contacts, your application for a loan is likely to be rejected by the bank. Lack of funding is a fairly common problem in Sweden. Many companies complain that they have problems getting enough funding to expand and invest, which prevents businesses from growing.
However, there have been many new loans for small businesses in Sweden recently. Independent credit companies are now trying to meet the demand for business financing.
At the same time, we can see a growing interest in alternative financing and crowdfunding, focusing primarily on project construction, small businesses, and entrepreneurs.
Tips To Improve Your Company’s Debt Service In Nordic countries:
Monitor Your Cash Flows
Keep an eye on your cash flow and make sure your payment dates are met. It is also vital to improve the quality of your cash flows.
For example, if your company has only a few clients, it will be more vulnerable if your clients have payment problems. In such cases, it may be worth considering insurance for your accounts receivable.
Consider Factoring Or Overdraft Facilities
Some companies have liquidity problems because they have to pay suppliers before they receive payments from their customers.
However, accounts receivable from customers are valuable and can be sold. It is called factoring and can help ensure that your company receives money even if your customers are unable to pay.
For example, your company may use accounts receivable from customers as collateral for overdrafts. Factoring is the best solution to provide quick access to your money.
Overdraft is a credit line option linked to a corporate account. Companies can use a credit line up to an agreed amount. It is vital to make sure that the limit is high enough. If your company is experiencing a time of a lower than usual level of income or if something goes wrong, you should have access to enough money.
Use Your Bank’s Expertise
In times of limited liquidity, there are various solutions to improve your cash flow. Your bank can offer cash flow advice for your company and should also have the right tools to help you.
The bank evaluates all loan applications individually. Therefore, it is essential to have a good business plan. It includes a budget and a description of who will do what, where, and why.
To Sum Up
Every business is unique. There is no universal solution. However, many companies go through a financial struggle at some stage.
To make a successful startup profitable is one of the most challenging parts of business life. Before making a surplus, you usually have to fight economic losses.
Borrowing investment money from a bank or credit company is usually necessary to survive the first two years. Lack of liquidity will hinder the healthy development of the company and, in the worst case, will lead to bankruptcy.
Keep your business afloat and put your ideas into practice by taking a loan. Choosing the right kind of financing is very important.
Attracting enough money to create healthy cash flow is a big challenge for any company. Finding investors willing to invest in your business is not always a viable option.
However, there are other ways to increase cash flow to finance your business. One of the easiest ways to create liquidity is to take a loan or credit on behalf of your company.