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Yle sources: Gov't planning new business bailout package

According to information obtained by Yle, the aid package could run from hundreds of millions to over one billion euros.

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Image: Lehtikuva
Yle News

Government is likely to announce a new round of support measures for Finnish businesses, according to information obtained by Yle.

Officials at the Ministry of Economic Affairs and Employment have already put together different scenarios to form the basis of government negotiations on the matter. However neither civil servants nor Economic Affairs Minister Mika Lintilä were willing to comment on the issue over the weekend.

Yle has learned that the government is looking to put together a form of support that has never been trialled in Finland before: a form of universal direct business support that will not have to be repaid. The model would see government provide a minimum of 100 million euros, but a total of more than one billion euros has also been bandied about.

"A cost-recovery proposal is on the table and I will take it to the cabinet next week for discussions," Lintilä told Yle on Friday.

Mission: Saving businesses from bankruptcy

The new round of relief is intended to accomplish just one goal: help save companies from bankruptcy. Yle has learned that the support package is currently targetting firms that have seen revenues shrink by at least 25 percent because of the coronavirus crisis. However businesses could receive even more than the equivalent of the 25-percent revenue losses.

It is also likely that firms could get the new round of funding even if they have already received grants from Business Finland's business development programme. However funding received under previous support schemes would affect what businesses receive in the new rescue round. The new form of blanket support would be designed to cover operational costs, as Lintilä hinted in his comment on Friday.

There are many questions still to be settled. What will be the threshold for being able to apply for additional state support: would it be the 25-percent of revenue loss limit or some other criterion? What would be the comparison period: January - February this year compared to the same time last year? How would the grants be paid out -- and over how long a period?

Last week a report by partially business-backed think tank Etla, suggested that the support package could be tailored to help firms that had seen revenues decline by 30 percent. It also proposed that it could target small and medium-sized companies with fewer than 250 on the payroll. This is a likely scenario, given that larger firms probably have stronger cash positions and their need for direct support is not as acute.

The new round of funding would be rolled out alongside development grants provided by Business Finland and municipal economic development centres (ELY Centres), as well as 2,000-euro lump sums paid out to solo entrepreneurs. However it will be means-tested, meaning that a determination will be made on whether or not companies really need the support or can do without it. It is also possible that other eligibility criteria will be included in the final version of the measure.

Satisfaction with universal support in Denmark

Although Finland has not exactly been tight-fisted supporting the business community during the crisis, the government has faced criticism for handing out aid in the form of development grants. According to the Pellervo research institute, Denmark has provided three times as much direct funding as Finland -- that companies don't have to repay.

However Finland's labour market, taxation and social support mechanisms are so different from Denmark's that direct comparison of any one kind of support is not possible.

Mika Kuismanen, chief economist of the Federation of Finnish Enterprises, said that government should have stepped up to provide a form of universal support for businesses earlier.

"This kind of universal support should have been the first and most effective tool from the very beginning. The nature of the crisis is such that companies need rapid bridge financing to cover fixed costs and other expenses," Kuismanen continued.

A not-so-universal programme

Even if the new round of business support is described as universal, the fact is that not all firms will be eligible for it.

If firms must report 25- to 30-percent revenue losses during the crisis to qualify, then just one in every four or five businesses would receive it. The others would be firms whose revenues fell less, remained the same or even rose slightly during that time.

One of the hardest hit areas has been the mass public event sector. Mirva Merimaa, CEO and controlling shareholder of ticket sales provider Tiketti, estimated that during the crisis the service has lost roughly one million euros in ticket sales every week. Tiketti controls about 10 percent of the market and Merimaa said the company is losing about half of its revenues.

"I would hope that the new form of support would somehow be proportionate to loss of sales. We might be able to keep people at work, pay rent and bills," she noted.

Merimaa said that she was worried about all firms in the business, not just her own. All of the company's employees have been partially furloughed: they work two or three days per week. They have not been fully laid off because the company is still working on tens of thousands of customer ticket refunds.

Tiketti is one of the firms that has received business development grants from Business Finland. According to Merimaa, the 100,000-euro grant has been useful, but she noted that it has been tied to future investments such as the partial automation of the ticket sales system.

"We are making 100,000 euros in losses every month at the moment, if not more. I hope that decision-makers keep the promises they made in March, that no viable business will end up bankrupt because of this crisis," she declared.

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