Optia: Demand for loan programmes surprisingly high

In December 2014, NIB and the Finnish savings bank Säästöpankki Optia signed a new loan programme for small and medium-sized enterprises (SMEs). The first EUR 15 million SME facility had by then been successfully allocated in just fifteen months. “The demand for these loans was even higher than we anticipated”, says Mr Kalevi Hilli, CEO of Säästöpankki Optia.

The second loan programme, this time worth EUR 20 million, is again targeting SME investments and environmental projects in Finland.

“There is definitely a need for this kind of financing among our corporate customers. Most SMEs are willing to increase their production capacity, and a NIB loan with its long maturity enables these well-planned investments”, says Mr Hilli.

Säästöpankki Optia operates from its headquarters in the town of Iisalmi in the eastern part of the country, where it was established in 1883. The majority of its 5,000 corporate customers are SMEs based in Finland’s eastern, northern and central regions. This vast operating area includes many sparsely populated communities that would, without their local SMEs, be prone to declining populations. The investments not only boost the SMEs productivity, they also employ local people either directly or indirectly.

“In my opinion, the role of SMEs in strengthening the vitality of Finland may not be totally understood yet. As long as we can provide appropriate financing and guarantees for SMEs, we can keep business and industry running, in the countryside as well as in the cities”, says Mr Hilli.

The first NIB-financed loan programme was allocated to more than 100 projects representing a broad array of industries and almost all regions in Säästöpankki Optia’s operating area. About 10% of the loan programme was allocated to two wind power projects in the Oulu region. The remaining loans, corresponding to 90% of the loan programme, were allocated to investments in new machinery and equipment, as well as agricultural and forestry customers.

“It was rewarding to see that we had potential borrowers in almost every office. The loan sums were not necessary always that high, which for me reflects that this type of financing is highly sought after. Also, it appears now that this second loan programme with NIB will be at least as successful as the first one”, says Mr Hilli.

According to Mr Hilli, the bioenergy sector in particular seems to be rapidly growing. The recent bioenergy plant initiatives, when realised, will require a functioning supply chain.

“We have been witnessing increasing interest in investments in this sector. I have positive expectations that the bioenergy cluster will create new SMEs or expand the current ones in our operating area. In order for wood raw material to reach the production plant, it has to be harvested, chipped and transported”, Mr Hilli explains.

Doubling capacity

Mika Sorsa is the Managing Director of Pro Grinding AM Oy, a company that maintains and manufactures cutting tools and specialises in precision components for the metal industry. Pro Grinding, based in Joensuu in Eastern Finland, received a loan from Säästöpankki Optia and NIB’s first loan programme in 2013. According to Mr Sorsa, for his enterprise, the gains from the loan are clear.

“We used the loan to invest in a new five-axis CNC grinding machine, which has really enhanced our business. Pro Grinding’s production capacity has doubled, we now employ two more people, and we’ve increased our turnover from 190,000 euros to 500,000”, says Mr Sorsa.

Pro Grinding’s new five-axis grinding machine represents a model example of investment in tangible capital, the type of investment that often has a positive impact on a company’s productivity. The benefits do not apply only to Pro Grinding; it is characteristic of SMEs that their innovative solutions will lead to the development of useful outcomes for the whole business sector and region.

“Because of the new machine, we have been renewing the whole precision grinding industry. Our customers used to buy their grinding tools from importers or retailers, and then throw them away when they reached the end of their useful lives. Our new machine lets us re-sharpen those used standard tools, and we can also create tailor-made, highly precise tools for individual customers. This is something completely new in this field. It brings significant cost savings for our clients, as re-sharpened tools made from recycled materials cost 30% of the price of new tools. On top of that, a substantial amount of time is saved when the tool is designed specifically for its purpose”, Sorsa explains.

Currently, Pro Grinding has clients in Finland, Sweden, Latvia and Lithuania. The focus, however, is on expansion, and Mr Sorsa is positive that there will be an investment need for another new machine sometime in the near future.