Frontpage News 2013 New micro loans re...

New micro loans reinforce growth

16 December 2013

The Growth Fund's new micro loans are according to the Danish Bankers Association good news for small businesses which thus will help them realise their business plans.

The banks are looking forward to working with the Growth Fund on the new micro loans targeted at so-called micro-enterprises. The new financing system came into being on the basis of an agreement that the Growth Fund has signed with the European Investment Fund.

The Danish Bankers Association has been advocating that the different support schemes are collected in the Growth Fund, creating one entry for companies and banks. Knowledge and experience in financing entrepreneurs and growth companies should be merged with one player instead of spreading the task out on multiple actors and administrations. The Danish Bankers Association would therefore welcome the new means of financing:
 
"The loans can help realise the growth plans of small businesses, such as self-employment, investments, working capital and change of ownership. It may be a contributing factor to support the growth everyone calls for," says Deputy Chief Executive at the Danish Bankers Association, Louise C. Mogensen.
 

The micro loan acts as a small growth guarantee

A micro loan can be up to DKK 185,000 and to qualify for the loan, the company must have fewer than 10 employees and a turnover of no more than DKK 14.9m or a balance of maximum DKK 14.9m. The micro loan works like a small growth guarantee where the Growth Fund guarantees a loss compensation of 75 percent. This applies as long as the bank's overall loss rate on the portfolio of microloans does not exceed 33 percent. If the loss rate is higher, the Growth Fund covers less than 75 percent of the loss.
 
The banks can make use the microloans with effect from 16 December 2013.
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