European Guarantee Fund: DKK 425m for Danish SMEs with Flex Funding
Danish SME-lending platform Flex Funding has signed a guarantee agreement with the European Investment Fund (EIF) for a total guaranteed portfolio of up to DKK 425 million. The new agreement, the first one with a crowd-lending platform under the “European Guarantee Fund”, ensures that hundreds of Danish SMEs will be able to benefit from new lending on more favourable terms. Flex Funding will provide new, more favourable, debt financing to these Danish SMEs ensuring that they have sufficient financing available to mitigate any economic impacts of the COVID-19 crisis, and are able to continue their growth and development in the medium to long-term. Flex Funding will co-invest at least 10% in all of the EGF-backed transactions this operation makes possible.
Henrik Vad, CEO and Founder of Flex Funding, said:
“We are very proud to be the first European SME crowdlending platform the EIF has placed its trust in. SMEs companies are the foundation of the economy and, in the current situation as well as in the future, need funding for growth and investment. With the EIF-guarantee, we can now offer our SMEs even better terms, including lower interest rates, thus boosting our loan origination significantly. This will also help to strengthen the SME crowdlending market in Denmark, which is still lagging behind compared to some other EU economies.”
Alain Godard, EIF Chief Executive:
“The European Guarantee Fund allows us to make available the necessary funding for European companies that struggle with the current economic conditions, and we are already seeing its effect in Denmark.”
As the first crowd-lending platform to get a guarantee under the EGF, Flex Funding can provide debt financing to SMEs on more favourable terms to sectors that have been particularly exposed to the pandemic.”
The European Guarantee Fund was founded by the European Investment Bank Group (comprising the EIB and the EIF) and EU Member States to ensure that SMEs with sustainable business plans are provided liquidity to overcome COVID-19 related adversities, and that healthy business are supported to grow.
The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe’s micro, small and medium-sized businesses (SMEs) by helping them to access finance. EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth and employment.
The European Guarantee Fund (EGF) was set up by the EIB Group with contributions from Denmark and other EU Member States to shield companies suffering from the economic fallout of the COVID-19 crisis. Using nearly €25 billion in guarantees, the EGF allows the EIB and the EIF to quickly make loans, guarantees, asset-backed securities, equity and other financial instruments available to mostly small and medium-sized enterprises. The EGF is part of the European Union’s recovery package aiming to provide a total of €540 billion boost those parts of the EU economy that have been hit the worst. Up to the end of May, over €10,5 billion worth of projects under the EGF had been approved, expected to mobilise around €89,5 billion of the €200 billion financing target.
Flex Funding, the pioneer and largest in the field of crowdlending to SMEs in Denmark, arranges loans via its own brand and via white label partners. The company, which was founded in 2013 and is based in Copenhagen, sees itself as a market and technology leader in the fast-growing SME crowdlending business in Denmark. As a provider of SME finance, Flex Funding has developed its platform to meet the financing needs of Danish SME borrowers through loans from investors interested in this asset class. By offering to arrange corporate loans in this way, Flex Funding enables SMEs to access highly attractive alternative finance options. At the same time, Flex Funding offers retail and professional investors looking for attractive investment opportunities access to SME finance. The company’s core competencies include the selection of suitable credit projects, credit quality analysis for potential borrowers, credit scoring, and risk-adequate pricing. Flex Funding receives fees for its services from both the SME borrowers and the investors. Since 2015, Flex Funding has successfully intermediated more than DKK 300m of loans, connecting more than 400 borrowers and over 2,800 active investors (retail and institutional). Given the successful roll-out in Denmark, and consistently high growth rates, Flex Funding aims to further expand its presence in the Nordics. In this context, an expansion to Sweden is planned for 2022.