Finnfund (Finnish Fund for Industrial Cooperation Ltd) is a Finnish development finance company that provides long-term risk capital for private projects in developing countries and Russia. By sharing risks with the sponsors, Finnfund seeks to promote investments that are not only profitable but also environmentally and socially sound. 

Finnfund invests mainly with Finnish companies but can also finance their local partners, such as long-term customers, suppliers, subcontractors and companies that license technology. In addition, Finnfund can co-invest with other development finance institutions in projects that do not directly involve Finnish business but that generate significant environmental or social benefits. Renewable energy, forestry and telecommunications are among the industries where Finnfund is eager to co-finance projects with other development financiers.

Instruments

 

Equity

Finnfund invests as a minority shareholder in projects managed by experienced and committed industrial sponsors. Its participation is determined on a case-by-case basis but is generally no more than 30% of the capital of the company being financed. Finnfund exits after operations have become established, usually after a 5-10 year holding period. Exit terms are typically negotiated prior to committing funds. Loans with equity features can also be considered.

 

Loans

Finnfund offers medium to long-term loans on market terms. The interest rate on investment loans depends on the project and the country risk, as well as on loan collateral and the length of the grace and repayment period. Maturities and grace periods are tailored to suit the project. Loans are typically denominated in dollars or euros. Finnfund is exempt from withholding tax on interest in several countries.

 

Mezzanine instruments

To best suit the capital needs of the project Finnfund can also provide financing through mezzanine instruments such as subordinated loans and preferred shares. In exceptional cases Finnfund can also grant guarantees, for example to facilitate client's access to financing in local currency.