Faroe Islands-based financial services company BankNordik has entered into an agreement with the European Investment Fund (EIF) under the “InnovFin SME Guarantee Facility”, reports ec.europa.eu.
Ec.europa.eu writes that the guarantee agreement will allow BankNordik to issue up to DKK 300 million (around €40 million)of new loans under more favourable conditions to local SMEs and small mid-caps.
The financing agreement is backed by the European Fund for Strategic Investments (EFSI), the heart of the Investment Plan for Europe. The InnovFin guarantee will allow the EIF to cover up to 50% of losses incurred in by BankNordik’s new lending, thus giving the bank an incentive to provide debt financing to innovative SMEs and small mid-caps on more favourable terms. The guarantee also translates into a better financing rate for the borrower.
European Commission Vice-President Jyrki Katainen said, according to ec.europa.eu: “Companies that are small, new, highly innovative – or indeed all three – often face difficulties in securing finance from banks. This is certainly the case in the Arctic region, where the vast majority of companies are logically smaller given the size of the overall economy. It can be particularly challenging to obtain loans in rural parts of Greenland. This is where the InnovFin programme and the EU budget guarantee are playing a vital role. Thanks to this new agreement between the European Investment Fund and BankNordik, businesses in the Faroe Islands and Greenland will see a marked improvement in their ability to access credit, with up to 300 million Danish krone now available for new loans.”