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SME Financing At The Start Of The Pandemic: From The Lender Perspective 

Working at CapitalBox for the past couple of years, helping SMEs access working capital and doing business with partners in the Nordic countries, I have heard many different perspectives on what the effects of the COVID-19 pandemic were during this past spring. Noticing that we have access to a lot of insightful data on the lending environment for small and medium sized businesses, I thought it would be helpful to share what our findings are on the effects COVID-19 had in the Nordics from the beginning of the crisis to June 2020. 


In this article I aim to answer two questions from the lender perspective: 

  • Were there any significant differences between pre- and peak crisis type of loan applications? 

  • Did the crisis have a large impact on the payment capabilities of small and medium sized businesses? 


Differences between pre- and peak crisis type of applications 



Looking at the data by industry from the beginning of the crisis period, March to June 2020, and comparing it to the same period in 2019, I cannot find any major difference in the share of applications received from any industry. 

Looking at what I would assume to be the most impacted industries, such as Travel and Accommodation, Restaurants (including bars and cafés), Auto Sales, and Passenger Transportation, there is a slight drop in the share of application received from the Restaurant sector during Q2 2020. 


This decrease could be explained by the uncertainty caused by restrictions enforced by the local governments and therefore restaurant owner’s unwillingness to invest in expansion. Both Denmark and Finland had forced shutdowns of restaurants until May 2020. Even though Sweden did not enforce shutdowns the sector suffered from a loss of business. Early indicators from the Swedish tax authority shows that turnover for accommodation and restaurant industries have declined by approx. 48% and 33% respectively in May compared to the same period the year before. 


Increased appetite for cash flow related requests from SMEs 

When companies are worrying or are having disturbances in their daily cash flow, they cite “Working Capital” as the purpose for the loan they are applying for. I can find a slight increase from 28% to 32% in the percentage of loan requests for “Working Capital” compared to 2019. At the same time applications for expansion purposes such as Buying new equipment, Marketing, and Hiring of new employees declined from 41% to 38%. 


Therefore, the decline in the share of applications from the restaurant industry is somewhat surprising. It could be that restaurateurs, due to the uncertainty, were more conservative about taking on more debt combined with governmental programs which for example allow temporary lay-offs and deferred tax payments reducing the immediate liquidity needs. 


Our data seems to be in line with findings from financial brokers such as Lendo that also saw an increase in working capital related financing needs during the spring, or Krea as well as Svenskt Näringsliv’s surveys (the Confederation of Swedish Enterprises) that report a drop in businesses willingness to invest for the coming 6 months.


Payment capabilities of small businesses 

Looking at the general payment behavior of small businesses (excluding industries directly related to traveling) no major negative effects stand out when comparing to pre-crisis period. However, a momentary need to reschedule loan amortization could be seen on all industries from mid-March. 


CapitalBox offers lenders the possibility to reschedule their loan repayment plan during the loan term. In practice this means that the lender can either request an amortization free period and only pay interest on the loan, or even request a fully payment free month; a “payment holiday”. 


Rescheduling requests peaked in the end of March when daily requests increased by more than 10 times, as compared to normal situation. As could be expected, the highly impacted industries had on average two times higher rescheduling frequency compared to other industries.  



Payment behavior for companies from Travel and Accommodation industries worsened quite significantly: the percentage of invoices paid within 30 days declined by around 2 times, as compared to normal situation. Payment behavior for Restaurants, Passenger Transportation or Auto Sales was not greatly impacted compared to other industries or pre-COVID-19 period. 


The rescheduling trend is now declining steadily back to pre-crisis levels and we can also see improved payment behavior for example in Denmark, probably due to the Governmental aid programs. 


The Pandemic disrupted the normal operations of most companies in the world at some level. Broken supply chains, loss of work force and clientele, lock downs, uncertainty about the future. To reflect on this uncertainty many commercial banks tightened their eligibility criterion and there is a huge need for working capital financing across all industries. 


CapitalBox is here to support small and medium sized businesses with fast and easy access to working capital, helping them to grow their businesses and improve their communities. We're active in 6 European countries with active plans to expand our footprint across the rest of the EU. 


If your business supports or works with SMEs contact me for a conversion on how we could work together in helping SMEs weather this storm and grow. 


Written by 

Heli Raulamo 

Business Development Manager