Financing SMEs and Entrepreneurs 2020

44. Sweden

Key facts on SME financing

In 2017, around 99% of limited liability companies with employees in Sweden were SMEs. They accounted for about 53% of total employment and 45% of GDP.

The stock of SME debt from banks and other financial institutions was SEK 1 290 billion in 2017, up by 10% in comparison with 2016. SME debt as a share of total outstanding debt was just above 40% in 2017, a slight increase from the previous year.

Surveys of bank managers’ views on business loan volumes indicate that loans to SMEs have increased since Q1 2012 and continue to increase; this development is concurrent with decreasing low interest rates on bank loans over the period.

The repo rate – the main policy rate of the Swedish Central bank (Sw. Riksbanken) remains negative, but was increased in January 2019 from -0.5% to -0.25%. The repo rate dipped below zero in February 2015, and has remained negative ever since.

Private equity investments in Swedish companies in the venture and growth stages stood at EUR 499 million in 2018, an increase of 1.67% from the previous year. Alternative finance volumes in Sweden totalled EUR 196 million in 2018, of which EUR 126 million was alternative business funding.

Almi’s lending decreased by 27% to SEK 1 857 million in 2017. The Swedish National Export Credits Guarantee Board issued guarantees totalling SEK 2.2 billion to SMEs in 2018, a 29% increase from 2017.

The Swedish parliament (Riksdag) adopted a proposal to address the structure of public financing for innovation and sustainable growth in June 2016 (the government’s bill 2015/16:110). A primary aim of the revised public financing structure is to clarify and simplify the system of state venture capital (VC) financing. Its purpose is also to improve the efficiency of public resources and contribute to the development and renewal of Swedish industry. A key feature of the new structure is the establishment of a new joint stock company, Saminvest AB, a fund of funds that invests in privately managed VC firms focusing on development-stage companies. In 2018, Saminvest AB invested in 6 VC funds, which in turn made 56 investments in growth firms.

Table 44.1. Scoreboard for Sweden

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018
Debt
Outstanding business loans, SMEs	SEK Billion	..	..	..	..	..	930	964	1 003	1 073	1 173	1 290	..
Outstanding business loans, total	SEK Billion	..	..	..	..	..	2 683	2 722	2 812	2 901	2 962	3 189	..
Share of SME outstanding loans	% of total outstanding business loans	..	..	..	..	..	34.66	35.39	35.67	36.99	39.60	40.46	..
Outstanding short-term loans, SMEs	SEK Billion	..	..	..	..	..	211	217	249	262	316	339	..
Outstanding long-term loans, SMEs	SEK Billion	..	..	..	..	..	719	747	754	811	857	951	..
Share of short-term SME lending	% of total SME lending	..	..	..	..	..	22.71	22.50	24.83	24.44	26.92	26.28	..
Direct government loans, SMEs	SEK Million	1 422	1 716	3 231	2 112	2 023	2 161	2 200	2 354	3 241	3 324	2 559	1 857
Non-performing loans, total	% of all business loans	0.08	0.46	0.83	0.78	0.65	0.70	0.61	1.24	1.17	1.04	1.12	0.49
Interest rate, SMEs	%	4.86	5.66	2.43	2.59	4.17	4.07	3.29	2.71	1.75	1.56	1.50	1.53
Interest rate, large firms	%	3.99	4.84	1.71	1.64	3.01	3.03	2.64	2.15	1.35	1.21	1.14	1.05
Interest rate spread	% points	0.87	0.82	0.72	0.95	1.16	1.04	0.65	0.56	0.40	0.34	0.37	0.48
Non-bank finance
Venture and growth capital	EUR Million	566.3	504.8	361.7	699.4	422.4	335.5	357.3	375.6	280.8	290.9	491.2	499.4
Venture and growth capital (growth rate)	%, Year-on-year growth rate	..	-10.86	-28.34	93.37	-39.61	-20.58	6.50	5.13	-25.25	3.61	68.83	1.67
Other indicators
Payment delays, B2B	Number of days	..	..	..	..	..	20.00	24.00	15.00	9.00	9.00	10.00	14
Bankruptcies, SMEs	Number	2 469	3 139	3 913	3 342	3 449	3 808	3 777	3 355	2 998	2822.00	3 019	3 392
Bankruptcies, SMEs (growth rate)	%, Year-on-year growth rate	..	27.14	24.66	-14.59	3.20	10.41	-0.81	-11.17	-10.64	-5.87	6.98	12.24

Source: See Table 44.3.

SMEs in the national economy

Of all the limited liability companies with employees in Sweden, 99% are SMEs. They account for around a third of total employment in the economy, and 60 % of employment in limited liability corporations.1 Production in SMEs account for 53% of value added in employee limited liability corporations, which corresponds to around 45% of GDP.2

Table 44.2. Distribution of firms in Sweden, 2016

By firm size

Firm size (employees)	Number	Share (in percent)
		Enterprises	Employment	Value added
SMEs (1-249)	330 298	99	60	53
Micro (1-9)	246 299	74	17	11
Small (10-49)	72 318	22	26	24
Medium (50-249)	11 681	3	17	18
Large (250+)	4 066	1	40	56
Total	334 364	100	100	109

Note: SMEs are defined in accordance with article 3 of directive 2013/34/EU. Limitations of population: Only limited liability companies are included, and companies within NACE sectors 01-03 and 64-66 are excluded. Non-employer enterprises are excluded.

Source: Statistics Sweden (2019).

SME lending

The stock of SME debt from banks and other financial institution was SEK 930 billion in 2012. It has steadily increased over the years to reach SEK 1 290 billion in 2017, up by 10% from the previous year. SME debt as a share of total business debt increased from 35 to 40% over the period 2012-2017. SME debt increased by 35% while large firms’ debt increased by 18% over the same period.3

Figure 44.1. SME and large enterprise debt in Sweden

In SEK billion

Note: SMEs are defined in accordance with article 3 of directive 2013/34/EU. Limitations of population: Only limited liability companies are included, and companies within NACE sectors 01-03 and 64-66 are excluded.

Source: Statistics Sweden (2018).

Statlink

Credit conditions

In the beginning of 2019, the Swedish Central Bank (Sw. Riksbanken) increased the repo rate4 for the first time since 2011, which currently stands at -0.25%.

The Central Bank continuously increased the repo rate until the eve of the financial crisis. The rate was increased to 4.8% just a week before the fall of Lehman Brothers in September 2008. As the crisis hit, the rate was lowered gradually until it reached 0.25%. The Central Bank began increasing the repo rate at the end of 2010 and it reached 2% by mid-2011. A negative growth shock – GDP contracted 1.1% the fourth quarter 2011 – spurred the Central bank policy of low interest rates, which still persists today. The repo rate dipped below zero in February 2015, and has remained negative ever since.

Figure 44.2. Repo rate in Sweden

As a percentage

Source: Riksbanken (2019).

Statlink

The interest-rate spread between small and large enterprises (proxied by loans above and below EUR 1 million) stands at 0.89 percentage points in Q3 2019. The spread was at a high of 1.29 percentage points in the first quarter of 2011. The spread has decreased since then, and was at an all time low at 0.26 percentage points in Q3 2015. The interest rate spread has since increased, especially in the second and third quarter of 2019.

Figure 44.3. Bank interest rates for small and large loans in Sweden

Source: European Central Bank (2019a and 2019b).

Statlink

Index of bank loan volumes

Almi, a state-owned corporation, performs quarterly surveys of bank managers’ views on business loan volumes. The survey is a relatively fast indicator of where the Swedish economy is heading.5 An index has been constructed to analyse the survey data.6

The most recent survey indicates that most bank managers estimate that loans to businesses have increased in the last quarter. This is the typical result, where only a minority of bank managers report decreased business lending. The index has dipped below zero only twice since 2007. The first of these occurrences was in the last quarter of 2008, during the most critical time of the financial crisis, and the second was in the fourth quarter of 2011, when Swedish GDP decreased by 1.1%.7 The index has remained positive since the first quarter of 2012. The increase in loans is concurrent with a low bank interest rate for business loans.

Figure 44.4. Bank interest rates and index of loan volumes in Sweden

Source: European Central Bank (2019a) and Almi (2019a).

Statlink

Alternative sources of SME financing

Private equity investments in Swedish companies in the venture and growth stages totalled EUR 499 million in 2018, an increase of 1.67% from the previous year. Typically, investments in Swedish companies have typically been larger for companies in the venture phase than for companies in the growth phase.8 In 2018, private equity investments in the venture stage stood at EUR 411 million, while investments in companies in the growth stage stood at EUR 88 million. Investments in the venture phase increased by 66% from the previous year, while investments in the growth phase declined by 64%.

Figure 44.5. Venture and growth capital investments in Swedish companies

In EUR million

Source: Invest Europe (2019).

Statlink

There is no reported shortage of venture capital supply for the information technology (IT) sector in particular. However, capital-intensive and long lead-time enterprises, such as cleantech, manufacturing and life-science enterprises report more difficulty in attracting VC investments.

Total alternative finance volume9 reached EUR 196 million in 2018, more than twice the 2017 value. This was primarily driven by an increase in peer-to-peer consumer lending. Alternative funding for businesses amounted to EUR 126 million in 2017. Invoice trading constitutes almost a quarter of all alternative business funding (EUR 31 million) (Cambridge Centre for Alternative Finance 2019).

Other indicators

According to the private company Atradius, the average payment delay for domestic B2B transactions in 2018 was 14 days, a year-on-year increase of four days (Atradius 2018).

SMEs, defined as enterprises with 1-249 employees, account for more than 99.9% of recorded bankruptcies among employer enterprises in the country. In the aftermath of the global financial crisis, the number of yearly SME bankruptcies increased from 2 469 in 2007 to 3 913 in 2009. In 2018, bankruptcies among SMEs totalled 3 392, an increase on the previous year by 12 per cent (Swedish Agency for Growth Policy Analysis 2019).

The share of non-performing loans was 0.5% in 2018, a reduction by more than half since 2017 (1.1%). Non-performing loans reached a low in 2007, when only 0.1% of all business loans were non-performing. The share of non-performing loans has increased since then, affecting more than 1% of all business loans in 2014 through 2017 (IMF 2019).

Government policy response

Market-complementary financing through state actors aims to improve access to finance in business stages and segments where the private market is particularly thin. Market-complementary financing is currently provided by, among other institutions, the state-owned corporation Almi (which provides loans, and venture capital through its subsidiary Almi Invest), and the foundation Industrifonden.

Throughout the financial crisis, the Swedish government engaged in a number of expansionary measures that included the strengthening of banks’ capital basis, securing bank lending and the provision of tax credits, export credit facilitation and business development programmes. The largest government measure to increase access to finance for SMEs was a capital injection and lowering the co-financing requirements that increased Almi’s lending capacity.

In June 2016, the Swedish parliament (Riksdag) adopted a proposal concerning the structure of public financing for innovation and sustainable growth (the government’s bill 2015/16:110). One aim of the revised structure is to clarify and simplify the current system of state VC-financing. The new structure also aims to better utilise public resources within the area and thereby contribute to the development and renewal of the Swedish industry. A primary feature of the new structure is the establishment of a new, joint stock company, Saminvest AB, a fund of funds that invests in privately managed VCs focusing on development-stage companies. Saminvest AB began operations in 2017. In 2018, Saminvest had invested in 6 VC funds, of which 3 were micro-funds. Micro-funds are smaller structures for seed financing with strong regional ties.

Public venture capital (VC) efforts and instruments (such as Saminvest and Almi invest) in Sweden are typically not targeted at specific sectors but focus on being supplementary to the Swedich VC-market. There is however one targeted initiative focusing on cleantech in the Swedish landscape of public financing. “The GreenTech VC Fund” run by Almi invest and co-funded by Almi Företagspartner, Almi Invest, the Energy Agency and the European Regional Development Fund. Investments will be made in areas such as renewable energy, recycling systems, energy, waste management, and combustion

Almi loans

Almi is a state-owned corporation and the parent company of 16 regional subsidiaries. It has a broad mandate that include debt brokerage, equity investments, and the provision of advisory services to companies. The organisation’s mission is to complement the private market and ensure that services are accessible nationwide. Almi is not limited by strict eligibility requirements in favour of particular sectors or business phases. Its focus, however, is on small- and medium-sized enterprises with high growth potential.

Almi nearly doubled the amount of loans granted between 2008 and 2009, as a result of the policy response to the financial crisis. In 2015, lending increased significantly again, the result of “a conscious effort to increase funding in early stages, where the lack of private capital is the greatest” (Almi 2017). New lending decreased in 2017 (23%) and 2018 (27%).10 Available capital was almost fully tied up in existing loans. In order to ensure a long-term sustainable level of new loans, Almi implemented measures to ensure a more balanced net lending and new loans picked up again in the fourth quarter of 2018 (Almi 2019b).

Figure 44.6. Loans granted by Almi in Sweden

New lending per year, in SEK million

Source: Almi (bespoke data takeout).

Statlink

Export credit guarantees

In Sweden, export credit guarantees are provided through the Swedish National Export Credits Guarantee Board (Sw. Exportkreditnämnden, EKN). 286 SMEs received guarantees totalling SEK 2.2 billion in 2018, a 29% increase compared to the previous year (EKN 2018 p.20).11 Guarantees to SMEs constitute approximately 4% of the total amount guaranteed by EKN.

Figure 44.7. Trends in SME and entrepreneurship finance in Sweden

Source: See Table 44.3

Statlink

Table 44.3. Definitions and sources of indicators for Sweden’s scoreboard

Indicator	Definition	Source
Outstanding business loans, SMEs	Sum of SME short and long-term liabilities from the balance sheet, excluding loans from group companies or associates and excluding firms with 0 employees. Excludes ISIC codes A (Agriculture, forestry, fishing) and K (Financial and insurance activities). Includes only limited companies. Group companies are classified to the size class according to the total number of employees in the enterprise group.	Statistics Sweden, Structural Business Statistics. Based on administrative data on liabilities collected from the National Tax Agency.
Outstanding business loans, total	Sum of short and long-term liabilities from the balance sheet, excluding loans from group companies or associates and excluding firms with 0 employees. Excludes ISIC codes A (Agriculture, forestry, fishing) and K (Financial and insurance activities). Includes only limited companies.	Statistics Sweden, Structural Business Statistics. Based on administrative data on liabilities collected from the National Tax Agency.
Outstanding short-term loans, SMEs	Sum of SME debts (liabilities) from the balance sheet with a due date less than 12 months from closing day, excluding loans from group companies or associates and excluding firms with 0 employees. Excludes ISIC codes A (Agriculture, forestry, fishing) and K (Financial and insurance activities). Includes only limited companies. Group companies are classified to the size class according to the total number of employees in the enterprise group.	Statistics Sweden, Structural Business Statistics. Based on administrative data on liabilities collected from the National Tax Agency.
Outstanding long-term loans, SMEs	Sum of SME debts (liabilities) from the balance sheet with a due date 12 months or longer from closing day, excluding loans from group companies or associates and excluding firms with 0 employees. Excludes ISIC codes A (Agriculture, forestry, fishing) and K (Financial and insurance activities). Includes only limited companies. Group companies are classified to the size class according to the total number of employees in the enterprise group.	Statistics Sweden, Structural Business Statistics. Based on administrative data on liabilities collected from the National Tax Agency.
Direct government loans, SMEs	Sum of new lending by ALMI.	ALMI Business Partner. Unpublished data.
Non-performing loans, total	"Bank nonperforming loans to total gross loans are the value of nonperforming loans divided by the total value of the loan portfolio (including nonperforming loans before the deduction of specific loan-loss provisions). The loan amount recorded as nonperforming should be the gross value of the loan as recorded on the balance sheet, not just the amount that is overdue."	International Monetary Fund (IMF), Bank nonperforming loans to total gross loans (%), http://data.imf.org/?sk=5ba7aeb2-c426-4b07-acae-ff4e5bbd461e&hide_uv=1
Interest rate, SMEs	Bank interest rates - loans to corporations of up to EUR 1M with a floating rate and an IRF period of up to one year (new business)	ECB, Data Source in SDW: http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=124.MIR.M.SE.B.A2A.F.R.0.2240.SEK.N
Interest rate, large firms	Bank interest rates - loans to corporations of over EUR 1M with a floating rate and an IRF period of up to one year (new business)	ECB, http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=124.MIR.M.SE.B.A2A.F.R.1.2240.SEK.N
Venture and growth capital	Sum of Private Equity investments in Swedish portfolio companies in the Growth and Venture phase.	Invest Europe
Payment delays, B2B	Average payment delay of domestic B2B customers	Atradius Payment Practices Barometer Sweden 2018, https://atradius.se/documents/ppb18_sweden_2018.pdf
Bankruptcies, SMEs	Number of court ruled bankruptcies for companies with 1-249 employees	Tillväxtanalys (Swedish Agency for Growth Policy Analysis)

References

Almi (2019a), Låneindikator Q2, 2019 https://www.almi.se/globalassets/almi/om-almi/undersokningar/laneindikatorn-2019-q2.pdf

Almi (2019b), Annual Report 2018, https://www.almi.se/globalassets/almi/startsida-och-nyheter/nyheter/arsredovisning/almis-ars--och-hallbarhetsredovisning-2018.pdf

Almi (2019c) Data produced by Almi specifically for the Scoreboard (not published).

Almi (2018b), Annual report 2017, https://www.almi.se/globalassets/almi/om-almi/finansiell-information/ar/almi-ar-2017web.pdf

Almi (2017), Annual report 2016, http://np.netpublicator.com/np/n36100118/Almi-%C3%85rsredovisning-2016.pdf

Atradius (2018), Atradius Payment Practices Barometer Sweden 2018, https://atradius.se/documents/ppb18_sweden_2018.pdf

Cambridge Centre for Alternative Finance (2019), Shifting Paradigms – the 4^th European Alternative Finance Industry Report. https://cdn.crowdfundinsider.com/wp-content/uploads/2019/04/CCAF-4th-european-alternative-finance-benchmarking-industry-report-shifting-paradigms-April-2019.pdf

EKN (2019), the Swedish National Export Credits Guarantee Board Annual Report 2018 https://www.ekn.se/globalassets/dokument/rapporter/arsredovisningar/ekn-arsredovisning-2018.pdf

European Central Bank (2019a), Bank interest rates - loans to corporations of up to EUR 1M with a floating rate and an IRF period of up to one year (new business) – Sweden http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=124.MIR.M.SE.B.A2A.F.R.0.2240.SEK.N

European Central Bank (2019b), Bank interest rates - loans to corporations of over EUR 1M with a floating rate and an IRF period of up to one year (new business) – Sweden http://sdw.ecb.europa.eu/quickview.do?SERIES_KEY=124.MIR.M.SE.B.A2A.F.R.1.2240.SEK.N

Government’s bill 2015/16:110 (Proposition 2015/16:110) – Staten och kapitalet - reformer för innovation och hållbar tillväxt, http://www.regeringen.se/rattsdokument/proposition/2016/03/prop.-201516110/

IMF (2019), Non-performing loans to total gross loans, per cent. http://data.imf.org/?sk=5ba7aeb2-c426-4b07-acae-ff4e5bbd461e&hide_uv=1

Invest Europe (2018), European Private Equity Activity Report and Data 2018, https://www.investeurope.eu/research/data-and-insight (membership wall)

Statistics Sweden (2012), Varuexporten tyngde BNP-utvecklingen, Statistiknyhet från SCB 2012-03-14, http://www.scb.se/sv_/Hitta-statistik/Statistik-efter-amne/Nationalrakenskaper/Amnesovergripande-statistik/Sveriges-ekonomi---statistiskt-perspektiv/197178/197186/Behallare-for-Press/Sveriges-ekonomi---statistiskt-perspektiv-4e-kvartalet-2011/

Statistics Sweden (2019), Data ordered from Statistics Sweden specifically for the Scoreboard (not published). These data are based on enterprises yearly financial declarations to the Swedish Tax Agency.

Statistics Sweden (2019b), Swedish GDP at current prices, in millions of SEK http://www.statistikdatabasen.scb.se/sq/76199 (accessed 2019-10-10).

Statistics Sweden (2019c), Total Employment in Sweden, in thousands http://www.statistikdatabasen.scb.se/sq/76201 (accessed 2019-10-10).

Sveriges Riksbank (2009), Ekonomiska Kommentarer nr 8, http://www.riksbank.se/Upload/Dokument_riksbank/Kat_publicerat/Ekonomiska%20kommentarer/2009/ek_kom_nr_8_sv.pdf

Sveriges Riksbank (2019), Repo rate, table, https://www.riksbank.se/sv/statistik/sok-rantor--valutakurser/reporanta-in--och-utlaningsranta/ (Accessed 2019-10-03)

Swedish Agency for Growth Policy Analysis (Growth Analysis) (2018), Bankruptcies and hearings on compositions without bankruptcies 2018, https://www.tillvaxtanalys.se/in-english/publications/statistics/statistics/2019-03-28-bankruptcies-and-hearings-on-compositions-without-bankruptcies-2018.html

Notes

← 1.  Employment in SMEs was 2 683 thousand, and total employment around 5 million people. Source Statistics Sweden (2019, 2019c)

← 2.  GDP in Sweden in 2017 was SEK 4 621 billion. Source Statistics Sweden (2019b)

← 3.  Long-term liabilities include: Bonds and debentures, convertible loans and the like; overdraft; building credit (Swedish: “byggnadskreditiv”) and other long-term liabilities to credit institutions. Short-term liabilities include: overdraft (short term) and other short-term liabilities to credit institutions.

← 4.  The repo rate is the rate of interest at which banks can borrow or deposit funds at the Riksbank for a period of seven days. The repo rate has been the Riksbank's policy rate since 1994.

← 5.  Almi cooperated with the Swedish central bank in the design of the survey. See Sveriges Riksbank (2009).

← 6.  An index of 0 means that either all bank managers’ report unchanged lending compared to the last quarter or that equally many managers report increased lending as managers reporting decreased lending. An index of 1 (-1) means that all bank managers reported increased (decreased) lending compared to the last quarter.

← 7.  Statistics Sweden (2012)

← 8.  Venture investments include investments in the “Seed”, “Start-up”, and “Later stage venture” stages. (Invest Europe 2016)

← 9.  Alternative finance includes “crowdfunding, P2P lending and other alternative finance intermediaries.” (Cambridge Centre for Alternative Finance 2018)

← 10.  Almi (2019c). Data in the scoreboard is produced with a method used previous years, to ensure comparability over time. This data is unpublished, because of a method change in the presentation of loan data (from loans granted to amount payed out) in the Annual Report 2018. Data is available on request from Almi.

← 11.  SMEs are now defined in accordance with EU recommendation 2003/361. (Enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million.) Data using the correct definition of SMEs is only available since 2014.