Frontpage News 2016 Equity is importan...

Equity is important for company financing

27 June 2016

The financing situation for companies has improved in recent years and banks stand in line to fund well-managed and solid companies. However, access to venture capital, particularly for small and medium-sized enterpris-es must be increased.
 
The Ministry of Business and Growth’s recently published “Lending Report” (Udlånsredegørelse) on the development of credit options in Denmark pro-vides, on the whole, the same picture of the lending situation in Denmark that banks are experiencing.
 
The report concludes that the financing situation for companies has im-proved in recent years. Banks are willing to grant financing to well-managed companies with sensible projects and this is in line with the Central Bank of Denmark’s conclusion in the latest quarter status from June 2016.
 
Companies’ interest rates in the bank reflect several circumstances. In their credit ratings, banks have an eye for earning capacity and the security that companies can provide. This generally means that larger companies pay a lower interest rate. Naturally, the size of the loan also plays a role. Smaller companies will typically face higher interest rates and this applies in particu-lar to companies that need to borrow the most in relation to equity. 
 
Therefore, a larger and necessary emphasis is being placed on companies’ equity and access to it. This is due to the fact that venture capital is crucial, as equity or other forms of responsible capital act as a necessary financial buffer.
 
“As a starting point, banks are lenders, not investors. It is, therefore, not the bank’s role to deliver venture capital and current access to venture capi-tal for SMEs in Denmark leaves much to be desired,” says the Chief Econo-mist at the Danish Bankers Association, Niels Storm Stenbæk.
 
The Ministry’s report shows that venture investments in relation to GDP have generally been declining in most of Europe after the crisis. And as something particular for Denmark, the number of stock marketing listings of small companies in particular has been extremely low in the last three years.
 
Therefore, there is still a marked need for access to venture capital so that the financing situation can be improved for an important segment of start-up and small and medium-sized companies.
 
Further information:
Head of Media Relations, Stine Luise Hansen
Tel.: +45 3316 1009
Email: slh@finansraadet.dk
 
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