Corporate loan collateral

A guarantee means that the guarantor agrees to repay the loan if your company’s repayment capacity weakens so that it can no longer cope with loan repayments. The guarantor can be the entrepreneur him/herself or another party. The guarantee may cover the entire loan amount or part of it.

Finnvera guarantees

Finnvera is an excellent partner in financing projects if your company is short of collateral. Finnvera grants guarantees for corporate loans, under varying terms and conditions. The guarantee may cover a substantial part (e.g. 80%) of the corporate loan. After your OP cooperative bank has issued a loan decision, the bank will help you with applying for a Finnvera guarantee. Finnvera provides guarantees intended for new companies and SMEs, among others. It will charge a guarantee commission and a service fee for any guarantees it grants.

Read more about Finnvera guarantees >

Risk-sharing guarantee

OP can offer SMEs the risk-sharing guarantee by the European Investment Fund (EIF). This credit  guarantee helps SMEs to obtain financing for faster growth and enables them to implement projects that are risker than normal. There are two options.

Read more about risk-sharing guarantee >

Personal guarantee

The company owners or other persons may act as guarantors. This is referred to as personal guarantee. The guarantor is liable for the loan he/she has guaranteed through all of his/her personal assets. In practice, guarantees given to a bank are always directly enforceable guarantees, i.e. the creditor may demand payment directly from the guarantor when the loan has fallen due. 
 

Real security

Real security refers to tangible property pledged as loan collateral.  Pledging means providing a certain pledged object in security for repayment of a loan instead of, for example, another person guaranteeing the repayment with all of his/her personal assets. If the company is unable to repay the loan, the pledged object will be realised and the funds obtained through the realisation will be used for loan repayment. 

The guarantor is not necessarily the debtor him/herself, which is referred to as third-party collateral. It means that, for example, the entrepreneur provides his/her assets as collateral for the company’s loan. 

Examples of an object of pledge:

• Examples of an object of pledge:
• business premises
• industrial property
• business mortgage, i.e. a company’s movable property (for example, machinery and equipment, investment assets, current assets, receivables) 
• vehicles and working machines
• apartment
• holiday home
• investment assets (equities and funds)
• wood lot.

Financed asset as collateral

Leasing or hire purchase provide alternatives for financing your company’s purchases. In these, the asset to be financed serves as collateral. If you intend to own the asset, hire purchase is the right alternative for you. Leasing, on the other hand, means hiring an asset on a long term basis for your company’s use.

Maintain your good credit rating – avoid instant loans

As a general rule, OP does not grant loans without guarantees at the moment. To ensure smooth access to corporate financing, make sure that your company and its key individuals have a good credit history. The instant loan trend is spreading to the business sector, too. We recommend that you familiarise yourself with the actual interest expenses of instant loans.

Collateral checklist

1. Can your company’s business plan succeed?

• The fundamental precondition is that the company’s business is profitable and that its future prospects are good.

2. Does your company have pledgeable assets?

• For example, business premises or industrial property can be used as collateral for a corporate loan. You can also pledge your company’s movable property. 

3. Make use of Finnvera guarantees

• The state-owned Finnvera provides companies of various sizes with guarantees that cover a substantial proportion of the collateral required for financing. This means that the company can use any own collateral for its subsequent financing needs.

4. Do you have personal assets that you could use as collateral? 

• If your company has not yet accrued any assets, you can pledge your personal assets. Alternatively, you can use personal guarantee as collateral for a loan.

5. Prepare well for loan negotiations

• Before making a financing decision, the bank needs to understand why you are applying for a loan and how it will improve your business. Any clarifications, calculations and analyses that you can provide will help. Other documents required include the latest official financial statements and an accounting run of the current financial year if more than six months have passed since the last financial statements. Information on the collateral provided, if any, is also required.