Financing SMEs and Entrepreneurs 2024

11. Denmark

Key facts on SME financing

In 2021, not counting non-employer enterprises, SMEs accounted for 98.7% of all enterprises and 38.7% of all full-time employees in Denmark.

New lending to SMEs from financial institutions increased from DKK 50 billion to 57 billion between 2021 and 2022, representing a 14% increase. The 2022 level was slightly higher than the average in the period 2014-2022. The share of new SME lending compared to total new lending was 7.35% in 2022, which is below the average of 10.43% in the period 2014-2022.

Interest rates for SMEs as well as for large firms have been steadily declining since 2008 until a few years back. The interest rates for SMEs have been increasing each year since 2019 from 1.85% to 2.72% in 2022, resulting in a widening interest rate spread. The 2022 interest rate spread reached 1.16 percentage-points up from 0.78 percentage-points in 2019 ascribed to a slight increase each year.

Venture and growth capital financing from Danish private equity firms increased in 2021 and 2022 and reached a record high level of EUR 1224 million in 2022. The overall increase results of an increase in growth capital as venture investments experienced a 52% decrease from the high level of 2021 to 2022. The 2022 level of venture and growth capital are significantly higher than any year between 2010 and 2020.

The average payment delays have been increasing over the last 3 years and is currently at the highest level at 14 days in 2022 for the period 2014-2022. The number of bankruptcies among SMEs increased from 1 768 in 2021 to 2 351 in 2022 explained in part by the phasing out of the COVID-19 support schemes.

In 2022, government loan guarantees decreased from DKK 2 260 million in 2021 to 1 542 million, and government guaranteed loans decreased from DKK 2 478 in 2021 million to 1 780 million in 2022.

The 1^st of January 2023 the Export and Investment Fund of Denmark (EIFO) was established through a merger of three previous state funds: The Growth Fund, Denmark’s Green Investment Fund and EKF Denmark’s Export Credit Agency. EIFO provides a single point of access for Danish companies requiring government financing and aims to improve growth in a green way.

Table 11.1. Scoreboard for Denmark

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Debt
Outstanding business loans, total	DKK billion	732	809	814	812	809	830	860	914	940	989	1 033	1 080	1 126	1 168	1302	1442
New business lending, total	DKK billion	332	385	318	313	292	241	303	474	519	508	521	570	597	505	517	780
New business lending, SMEs	DKK billion	41	35	28	35	34	39	37	55	73	51	52	49	68	56	50	57
Share of new SME lending	% of total new lending	12.29	9.15	8.96	11.21	11.70	16.25	12.07	11.51	14.10	10.12	10.08	8.60	11.36	11.08	9.73	7.49
New short-term loans, SMEs	DKK billion	26	26	22	23	24	20	22	34	35	31	29	27	24	26	25	39
New long-term loans, SMEs	DKK billion	14	9	6	23	10	19	15	21	38	21	23	22	44	30	25	19
Share of short-term SME lending	% of total SME lending	64.70	74.57	78.79	50.00	70.53	51.49	60.25	62.38	48.48	60.00	55.63	55.09	35.66	46.04	50.20	67.25
Government loan guarantees, SMEs	DKK million	210	178	209	769	1 192	1 222	783	658	668	620	514	529	512	7972	2260	1542
Government guaranteed loans, SMEs	DKK million	..	..	..	..	17	61	286	746	1 076	1 257	1 377	1 225	1 246	2 934	2478	1780
Interest rate, SMEs	%	5.97	6.59	5.33	4.39	4.38	3.91	3.78	3.44	2.99	2.74	2.36	2.27	1.85	1.93	2.02	2.72
Interest rate, large firms	%	5.23	5.68	3.63	2.49	2.40	2.14	1.73	1.65	1.53	1.34	1.23	0.98	1.07	1.03	0.90	1.56
Interest rate spread	% points	0.75	0.91	1.70	1.90	1.97	1.77	2.04	1.79	1.45	1.40	1.12	1.29	0.78	0.90	1.11	1.16
Non-bank finance
Venture and growth capital	EUR million	263	205	159	280	186	270	241	230	339	554	532	699	475	424	1076	1224
Venture and growth capital (growth rate)	%. Year-on-year growth rate	..	-22.34	-22.45	76.57	-33.49	45.13	-10.81	-4.73	47.66	63.33	-4.03	31.47	-32.03	-10.90	150.3	12,4
Other indicators
Payment delays, B2B	Number of days	7.2	6.1	12.0	12.0	13.0	12.0	10.0	9.0	4.0	4.0	2.0	3.0	3.0	14.0	11	14
Bankruptcies, SMEs	Number	..	..	2 563	2 583	1 938	1 958	1 698	1 328	1 584	1 853	1 888	2 013	2 153	1 841	1768	2351
Bankruptcies, SMEs (growth rate)	%. Year-on-year growth rate	..	..	..	0.78	-24.97	1.03	-13.28	-21.79	19.28	16.98	1.89	6.62	6.95	-14.49	-3.97	32.98

Source: See Table 11.4.

Macroeconomic and financing conditions

In 2022, the growth in GDP was 2.7% down from 4.7% in 2021. The growth is expected to decline due to high inflation and interest rates. The remaining growth is caused by continuing development in life science. The inflation in Denmark reached a maximum of 10.3% in October 2022 and decreased steadily since resulting in an inflation of 7.5% in 2022.

SMEs in the national economy

In 2021 SMEs (approximated by firms with less than 100 employees) accounted for 98.7% of all enterprises and accounted for 38.7 of all full time employees in Denmark, not counting non-employer enterprises.

Table 11.2. Distribution of firms and employees, 2021

By firm size

Firm size (employees)	% of firms	% of full time employees
SMEs (1-99)	98.7	38.7
- Micro (1-9)	86.3	14.3
- Small (10-49)	10.9	17.0
- Medium (50-99)	1.4	7.4
Large (100+)	1.3	61.3

Note: Non-employer enterprises (< 1 full time equivalent employee) are not included.

Source: Danmarks Statistik.1

SME lending

Lending to SMEs (approximated by loans amounting to less than EUR 1 million) from financial institutions increased from DKK 50 to 57 billion between 2021 and 2022. The increase is among other a result of government loans maturing causing increased demand for takeover of loans by financial institutions. The share of new SME lending compared to new total lending was 7.35% in 2022, below the average of 10.43% in the period 2014-2022.

New short-term SME loans increased by 52.6% in 2022 while new long-term loans decreased by 33.5%. The share of short-term loans to long-term loans thus increased from 50.2% to 67.25%.

Credit conditions

Interest rates for SMEs as well as for large firms have been steadily declining since 2008 until a few years back where that changed. The interest rates for SMEs have been increasing each year since 2019 from 1.85% to 2.72% in 2022, resulting in a widening interest rate spread. The 2022 interest rate spread, currently at 1.16 percentage points, has been increasing since 2019.

Alternative sources of SME financing

According to the European Venture Capital Association database (published by Invest Europe), venture and growth capital financing from Danish private equity firms increased in 2021 and 2022 and reached a record high level of EUR 1224 million in 2022. The overall increase results of an increase in growth capital as venture investments experienced a 52% decrease from the high level of 2021 to 2022. The 2022 level of venture and growth capital is significantly higher than any year between 2010 and 2020.

Table 11.3. Venture capital and growth capital in Denmark, 2010-2020

By stage of investment (in EUR thousand)

	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Total venture	191 778	199 649	201 866	283 918	297 866	264 472	615 969	413 915	356 946	553 766	264 169
Growth capital	78 683	41 584	27 952	55 438	256 412	267 458	83 355	61 445	66 598	535.329	959 489
Total	270 461	241 233	229 819	339 356	554 277	531 930	699 324	475 360	423 544	1089 095	1223 658

Note: Industry statistics.

Source: Invest Europe.

Other indicators

According to Intrum, B2B (business-to-business) payment delays have been increasing significantly over the last 3 years and are currently at the highest level for the 2014-2022 period, at 14 days in 2022. The number of bankruptcies among SMEs increased from 1 768 in 2021 to 2 351 in 2022. The higher number of bankruptcies is considered to reflect the extensive COVID-19 support measures. These measures, started during 2020, lowered the amount of bankruptcies during their lifetime but are now being phased out.

Government policy response

The Danish Export and Investment Fund (EIFO) is a new government backed investment fund established in 2023. EIFO was created through a merger of the three state-owned funds: Vækstfonden, EKF Danmarks Eksportkredit and Danmarks Grønne Investeringsfond. As of January 1, 2023, they became subsidiaries under EIFO. On April 1, 2023, the former funds were dissolved and joined in one entity. EIFO offers guarantees and loans to established SMEs and entrepreneurs, invests equity in young companies with growth potential and engages in fund of funds activities by investing in venture and small to mid-cap funds.

EIFO is also a government backed export credit agency who offers guarantees, insurance and loans to Danish exporting companies and their customers in order to make it more attractive for them to purchase products from Danish companies.

Government guaranteed loans

Growth loans (Vækstlån) are subordinated loans issued by EIFO directly to SMEs seeking capital for business development or a change of ownership. The financial assessment is based on the company’s current and past performance, its potential for growth and profitability, as well as its management capabilities. All loans are granted as part of a funding package that is provided by other financial partners, such as banks and mortgage institutions. Only loans above DKK 1 million are issued. The interest rate is set at least 30% above the comparable market rate to ensure minimal market distortions, avoid a crowding out of the private sector, and hedge against collections/defaults in which banks and other creditors have preferred claims on pledged collateral.

In 2019, the Danish government introduced a match financing scheme (Matchfinansieringsordningen) which allows EIFO to issue loans (Startlån), convertible loans (Early Engagement) and loans designed to match investments of pre-approved angel investors (Business Angel Matching Lån). The loans are specifically targeting young enterprises who may in time be eligible for venture capital, in other words, highly scalable and potentially global enterprises with an innovative product or business model. The maximum loan amount for all three types of loans is DKK 7.5 million and the maximum maturity is 10 years.

The export loan facility in EIFO was established to support the international competitiveness of Danish enterprises and benefit Danish exports affected by the financial and economic crisis. The credit scheme supports Danish exports with long credit periods, i.e. more than two years. The total credit limit for the export loan scheme is DKK 25 billion.

The amount of government guaranteed loans decreased from DKK 2 478 million in 2021 to DKK 1 780 million in 2022. However, this development must be seen in the light of the COVID-19 loan and guarantee schemes outlined below.

Government loan guarantees

Small guarantees (Vækstkautioner) are provided to SMEs and cover up to 75% of a bank’s loss in the event of a default. Capped at DKK 2 million, growth loan guarantees can be granted to finance business development, changes in ownership, capital investments, or the development of new and improved products.

Compared to the small guarantees, growth guarantees (Vækstgarantier) target the more established SMEs that need to make larger investments or expand their businesses. A growth guarantee covers the risk associated with insufficient collateral as a basis for achieving a pre-payment warranty or lease, for example. A company can obtain a growth guarantee as part of a growth plan that has sound economic perspectives. Only guarantees above DKK 1 million are issued, either alone or in combination with a growth loan. In this combination the granting of a growth loan conditions on the market raising at least 30% of the capital requirements. Growth guarantees cover 100% of loan risk (typically for 50% of the project costs) and companies must provide collateral to obtain them. Unlike for small guarantees, EIFO has no political mandate to generate aggregate losses under the growth guarantee scheme.

The working capital guarantee in EKF was first established as a temporary guarantee scheme to provide operating and development credit up to DKK 2 billion, for Danish export firms. EIFO can guarantee up to 80% of operating and development credit extended by banks to Danish export firms and their sub-suppliers. EKF assumes all rights and obligations associated with the scheme.

Government loan guarantees issued to SMEs decreased from DKK 2260 million in 2021 to DKK 1542 million in 2022. However, this development is a result of, among others, the phase out of the COVID-19 loan and guarantee schemes outlined below.

COVID-19 loan and guarantee schemes

Due to the effects of COVID-19, the Danish government implemented two new loan schemes under which EIFO can match the investments of professional investors with a loan of three times the amount of the investment (COVID-19-mathfinansieringsordninger). The main objective of the schemes has been to keep steady private investment in early stage and venture companies during the crisis.

Additionally, two guarantee schemes targeting SMEs were implemented in EIFO. The guarantees can cover 90% of the risk on new loans from commercial banks to SMEs who have experienced a decline in turnover of more than 30% due to COVID-19.

Figure 11.1. Trends in SME and entrepreneurship finance in Denmark

Source: See Table 11.2.

Statlink

Table 11.4. Definitions and sources of indicators for Denmark’s Scoreboard

Indicator	Definition	Source
Debt
Outstanding business loans, total	Outstanding business loans amount to existing loan agreements that have not been realized at the time of accounting and hence still exist on the balance sheet. All loans summarized in the data regard non-financial institutions. Loan providers are banks and mortgage-credit institutions. Regarding banks, outstanding loans amount to a day-to-day average of the monthly balance. As for mortgage-credit institutions, outstanding loans amount to the balance at the end of the month for mortgage loans based on covered bonds, and as a day-to-day average of the monthly balance regarding other loans. There is a break in the data in October of 2013.	Danmarks Nationalbank, DNRUUM
New business lending, total	Flow of loans to non-financial companies of all sizes. Data is monthly, aggregated to arrive at annual data. There is a break in the data in October of 2013.	Danmarks Nationalbank, DNRNUM
New business lending, SMEs	Flow of loans to non-financial companies of less than 7.5 million DKK. Data is monthly, aggregated to arrive at annual data. There is a break in the data in October of 2013.	Danmarks Nationalbank, DNRNUM
New short-term loans, SMEs	Short-term SME lending is approximated by using loans issued at a value of EUR 1 million or lower, with an interest rate to be adjusted annually or more frequently. There is a break in the data in October of 2013.	Danmarks Nationalbank, DNRNUM
New long-term loans, SMEs	Long-term SME lending is approximated by using loans issued at a value of EUR 1 million or lower, with an interest rate to be adjusted less than annually. There is a break in the data in October of 2013.	Danmarks Nationalbank, DNRNUM
Government loan guarantees, SMEs	Guarantees (growth guarantees and small guarantees) to SME enterprises granted by Vækstfonden (The Danish Growth Fund). In 2020, the COVID-19 SME guarantee schemes administered by The Danish Growth Fund and Denmark's Export Credit Agency (EKF) have also been included.	Vækstfonden and EKF
Government guaranteed loans, SMEs	Loans to SME enterprises granted by Vækstfonden (The Danish Growth Fund) and backed by government guarantees. The loans consist of growth loans (Vækstlån) and loans under the match financing scheme (Matchfinansieringsordningen). In 2020, the COVID-19 loan schemes (COVID-19-matchfinansieringsordninger) administered by Vækstfonden have also been included.	Vækstfonden
Interest rate, SMEs	Weighted average annual rates for new loans, with maturity up to 1 year; and amounts for up to DKK 7.5 million. Monthly rates are weighted such that interest rates in very active months should have a larger weight when calculating the yearly interest rate, than interest rates where almost no loans were issued. There is a break in the data in October of 2013.	Danmarks Nationalbank, DNRNUM
Interest rate, large firms	Weighted average annual rates for new loans, with maturity up to 1 year; and amounts for more than DKK 7.5 million. Monthly rates are weighted such that interest rates in very active months should have a larger weight when calculating the yearly interest rate, than interest rates where almost no loans were issued. There is a break in the data in October of 2013.	Danmarks Nationalbank, DNRNUM
Non-bank finance
Venture and growth capital	Investments - Industry statistics (by country of private equity firm), All Private Equity. Sum of Total venture and Growth capital.	Invest Europe
Other indicators
Payment delays, B2B	Average delay in number of days for business-to-business. Data for 2007 is the average for both the number of days for business-to-business, business-to-customer and public entities.	Intrum
Bankruptcies, SMEs	Monthly declared bankruptcies in companies with employment of 1-19 employees. Aggregated to annual data.	Danmarks Statistik, KONK7

References

Danmarks Nationalbank, DNRNUM (2023): ”DNRNUM: New domestic loans excl. revolving loans, etc. from MFI sector excl. Danmarks Nationalbank.” https://nationalbanken.statistikbank.dk/statbank5a/default.asp?w=1843

Danmarks Nationalbank, DNRUUM (2023): ”DNRUUM: Outstanding domestic loans from the MFI sector excl. Danmarks Nationalbank.” https://nationalbanken.statistikbank.dk/statbank5a/default.asp?w=1843

Danmarks Nationalbank, DNUDERHV (2023): “DNUDERHV: Credit condition survey, corporate lending (net figures).”

https://nationalbanken.statistikbank.dk/statbank5a/default.asp?w=1843

Danmarks Statistik, KONK7 (2023): “KONK7: Bankruptcies by employed.” http://www.statbank.dk/KONK7

Danmarks Statistik, GF3 (2023): ”GF3: General enterprise statistics.” https://www.statistikbanken.dk/statbank5a/SelectVarVal/Define.asp?Maintable=GF3&PLanguage=1

Intrum (2023): “European Payment Report 2022.”

https://www.intrum.com/media/2772/epr-2018.pdf

Invest Europe Research (2023): “European Private Equity Activity Data 2022.” https://www.investeurope.eu/research/activity-data/

Note

← 1.  Danmarks Statistik, GF3