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Controversy around Business Finland and ELY Centre funding – SY chief economist: “not the time to get discouraged”

Instead of looking at controversial examples, we should look at the big picture, says Mika Kuismanen, Vice President Economics and Chief Economics at Suomen Yrittäjät.

Financial support for businesses has become the subject of controversy. The recipients of support have included a PR agency, an online auction site of TV auction king Aki Palsanmäki, the Huono äiti (“bad mum”) blog community and a small consulting firm belonging to the CEO of Posti.

These cases understandably made the headlines as the sectors and companies involved were not necessarily the worst-hit by coronavirus restrictions. A hundred thousand euros for a successful company feels wrong while other entrepreneurs fear for their livelihoods and employees.

Kuismanen says that instead of looking at controversial examples, we should look at the big picture, however.

“Now is not the time to get discouraged. What’s important is for as many businesses as possible to get support as quickly as possible.”

He adds, “Just because a business owner is in the news doesn’t make their company worse than any other company. It’s just as important a company as any other and all support from Business Finland is put into proportion with the company’s regular turnover.”

Development support for legal reasons

When the coronavirus crisis erupted, the first thing the Finnish government did to ease businesses’ problems was to offer state-backed guarantees for loans via Finnvera and the banks. Not all companies have been able or willing to borrow money, given the uncertainty about the future.

The next step was support for businesses distributed via Business Finland and then the ELY Centres. The municipalities distribute €2,000 operational support grants to single-person businesses.

For legal reasons, these payments take the form of development support. This has been difficult for many businesses to digest, as they feel they need direct support for overheads.

In an article in Iltalehti, Mika Lintilä, minister for employment and the economy, reminded readers that Business Finland is not intended to be a crisis funder.

“But it’s been made into one. There were two candidates for this role in Finland: Business Finland and ELY Centres,” Lintilä wrote.

The organizations were quick to assume this role, but the law does not catch up as fast. For example, Business Finland can grant funding for developing a company’s operations, but not to cover losses.

Fast process

At the beginning of the coronavirus crisis, it was important to distribute financial support quickly. Processes and application forms were simplified, and efforts were made to make the whole chain smooth, albeit with varying success.

“It’s important for applications not to be studied in extreme detail, as that could take too long. Clearly, there are companies that get funding that do not need the support as badly as others,” Kuismanen says.

He says that Business Finland and the ELY Centres have come under fire through no fault of their own.

One large group of companies which have suffered from the restrictions is the restaurant sector. Kuismanen thinks assistance channels need to be found for businesses in this area.

“If the authorities shut down operations in a certain sector, then they should come up with a solution for this sector. That doesn’t mean that other sectors don’t need help though. Consultants and IT companies have been brought into the discussion without reason. I’d presume these companies have had the knowhow to apply for the first wave of support on time. It’s vitally important for there to be enough money for the second wave, when we’re going to see more applications from other sectors, such as restaurants,” Kuismanen says.

The Ministry of Economic Affairs and Employment has said it will review the distribution of financial support for business by Business Finland.

“This is in the best interests of all parties,” Lintilä tweeted.

 

Elina Hakola

elina.hakola (at) yrittajat.fi