If you are looking for business loan options in Denmark, Estonia, or Norway, and you would like to know more about regulations that apply, you’ve come to the right place. In this article we take an in-depth dive into the various choices open to you and the rules of which you need to be aware on a country-by-country basis. Please read on.
Business Loan Options in Europe
Similar loan sources are available in most European countries. They include, but are not limited to:
- Angel investors
- Bank loans
- Crowdfunding
- Government loans and subsidies
- P2P (Peer to Peer)
- Alternative digital finance platforms
Bank loans are available in some countries from Hight Street banks that operate an SME-friendly approach, and the EIB (European Investment Bank) under the right circumstances.
Rules and Regulation Applying to Business Loans in Denmark
When applying for business loans in Denmark, via traditional financial institutions such as banks or the Danish Growth Fund (Vækstfonden) the process can be tedious and time consuming, particularly if the loan is to fund a business start-up. You will need to have a good business plan and come armed with the necessary information. The same is true if you are seeking to borrow money for expansion, for buying raw materials and stock, or for smoothing cash flow problems. You’ll need:
- Business legitimacy (including registration)
- Operational history.
- Proof of financial health.
- Cash flow history and projections.
- The business or owner’s credit standing.
- Collateral (if applying for a secured loan).
- Industry specific information (depending in which sector the business operates).
- History of legal and tax compliance.
As you can see the process and the information required when applying for business loans in Denmark through traditional financial institutions, is challenging, which is why many entrepreneurs and business owners are turning to alternative lending platforms. More about this option, later.
Rules and Regulation Applying to Business Loans in Estonia
In addition to the general business loan options in Europe mentioned earlier, other options specific to Estonia include
- Estonian state and local governments entrepreneurship grants.
- Enterprise Estonia.
- County development centres.
Advice and help is available for locating financial assistance from organisations such as County Development Centres, and the Tallinn Entrepreneurship Centre. If your business focusses in environmental issues, the Environmental Investment Centre (KIK).
In terms of eligibility when it comes to applying for business loans, the following points should be addressed:
- The business has to be registered and operating in Estonia.
- A good credit history is necessary for the company itself, or its board members.
- Presentation of a profit and loss statement could be required in order to prove that company (if operational) is solvent.
The type of companies that can apply for business loans in Estonia include OÜ (limited liability companies), AS (joint stock companies), and FIEs (individual entrepreneurs).
Rules and Regulation Applying to Business Loans in Norway
Norway has a well-established legal tradition regarding the financing of investments or financing of business enterprises. Business loans and credit agreement that are granted by banks and other financial institutions are, I principle, governed by the Norwegian Financial Contacts Act, but not all of the provisions are mandatory when it comes to commercial loans.
In Norway, the process of lending is a regulated activity and to be eligible to lend, lenders have to be authorised by the Norwegian FSA (Financial Supervisory Authority). They police:
- How loans originate, and how they are marketed and sold.
- That lenders offer loans on an ongoing basis.
- How delinquent borrowers are dealt with.
To be eligible to offer loans in Norway, foreign organisations must establish Norwegian subsidiaries which must be regulated by the Norwegian FSA. Business loans from traditional sources may only be granted within the confines of the value of company assets and if appropriate security is evident.
The Rise of Alternative Business Lending Platforms in Europe
Given the complexity and time-consuming process that business loan applications take with going via traditional lending sources, more and more entrepreneurs and business owners are turning to alternative finance platforms that have arisen in the Fintech industry throughout Europe.
High-tech technology, including AI and advanced digital algorithms, make comparing and taking out business loans quicker, easier and considerably less stressful. All three of the countries we’ve shone the spotlight on are following the trend.
- In Denmark, the alternative business loan sector was forecast to be worth US$483.0 million for the year 2024. With a projected CAGR of 8.6%, it is predicted that the worth of the sector will increase to US$671.1 million by 2028.
- The digital revolution taking place in Estonia’s banking sector is significantly altering the status quo and is offering the business sector unparalleled convenience and ease of use. The commitment to digital innovation that Estonia shows simplifies banking for enterprises and sets a benchmark for corporate banking globally.
- The business loan sector in Norway is heavily influenced by global trends including the rise of digitisation and alternative lending models.
For companies seeking business loans in Europe, the future looks bright. Whether you opt for the traditional lending sources or the new Fintech, alternative lending platforms, business owners can attain the finance they need and thanks to national and EU rules and regulations. However, it is essential that you first ascertain that the source you turn to is properly regulated.