NIB to advance lending to SMEs and mid-caps

NIB is expanding its core product range to provide more financing opportunities to small and medium-sized enterprises (SMEs) and mid-cap companies in its member countries. This revised strategy will bring in changes in the ways the Bank supports smaller businesses.

For decades, NIB has been living up to its mission by granting direct, long-terms loans to large private and public sector borrowers and placing loan facilities for SME investments with local intermediary banks. This remains the backbone of the Bank’s strategy. The question is: what more can the Bank do to fulfil its mission?

In order to increase its relevance to the economies of its member countries, NIB will gradually increase its exposure to smaller businesses—SMEs and mid-cap companies.

“We have three important messages for the SME sector in the Nordic and Baltic countries. Firstly, we have eased the mandate eligibility criteria for SMEs to qualify for funds from NIB’s loan facilities”, says Marjo Harri, Head of Financial Institutions and SMEs Group at NIB.

In the past three years, NIB has been releasing funds for SME investments in production machinery and equipment, ICT, and research and development.

“The revised approach will allow us to back up smaller businesses in financing their long-term working capital needs.”

“Secondly, we have expanded our definition of SME”, Ms Harri continues.

“The revised approach lifts the upper limit of an eligible company’s annual turnover from EUR 50 million, as in the EU’s definition we have used until recently, to EUR 150 million.”

Thirdly, NIB will now be able to finance smaller businesses as a risk-sharing partner with other banks—in addition to the traditional programmes of onlending funds through intermediaries.

“Risk sharing is a new product that we are offering to intermediary banks. As the name suggests, NIB would not only fund a lending facility intended for SMEs, but also carry a portion of the risk related to lending to smaller businesses.”

Marjo Harri

Senior Director, Head of Financial Institutions & SMEs Group, Lending, NIB

Ms Harri explains how risk sharing will work:

“Imagine an intermediary bank that has long-standing relationships with a number of quality clients that have eligible projects, from NIB’s point of view. The intermediary, however, cannot increase its exposure to these clients due to the risk limits that all banks have. This situation is not at all exceptional in the market. NIB will be able to help by stepping in to take over part of the risk, which will allow the intermediary to extend financing to good SME projects.”

Direct lending to mid-caps

Private sector mid-caps—companies with an annual turnover of up to EUR 500 million—are a relatively new target for NIB’s lending. The Bank will engage with this group of customers directly.

“Private sector mid-cap companies are often drivers of investment and innovation. This is the main reason why NIB is now extending its lending offer to mid-cap companies”, says Joe Wright, Head of Transaction & Portfolio Management at NIB.

“NIB will offer senior, long-term loans to mid-caps to enable them to diversify and extend the maturity of their debt financing.”

The size of loans to mid-caps will tend to be smaller than in NIB’s core business. The clients will operate in more diverse sectors, and they will be more regionally distributed.

“It’s going to be harder work” says Mr Wright.

"We will continue to rely on NIB's core strenghts: our commitment to long-term lending, our competence in understanding business and financial risk, and a track-record of long-term cooperation with our clients."

Joe Wright

Senior Director, Head of Transaction & Portfolio Management, Lending, NIB