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Firm in difficulty

Funding cannot be granted to a company that is a ‘firm in difficulty’ according to the EU definition.

According to the EU state aid rules, a firm is in difficulty if at least one of the following five conditions is met:

  1. The company is a limited liability company that has lost more than half of its subscribed share capital due to accumulated losses.
  2. The company is a general or limited partnership that has lost more than half of its own assets due to accumulated losses according to the financial statements.
  3. The company has been placed into liquidation or bankruptcy due to insolvency.
  4. The company has received rescue aid and has not paid it back yet, or it has received restructuring aid and is the subject of a restructuring plan.
  5. In addition to the above conditions, large companies are also considered to be in difficulty, if both of the following conditions are met based on two previous confirmed annual financial statements:
    • the company's debt-to-equity ratio has been over 7.5 and
    • the ratio of the company's operating margin to its net financing costs has been under 1.0.

If the company is less than 3 years old, it is considered to be in difficulty based on section 3 alone.

If a company is a part of a group, both Business Finland's client company as well as the whole group are assessed on whether they are in difficulty. An individual company cannot be funded, if the group or the parent company in the same group meets the criteria of a firm in difficulty.

Business Finland assesses the company's equity when deciding on the funding, including during a financial period. Even in cases where the company's previous financial statements did not indicate financial difficulties, the company's current equity as of the ongoing financial period is assessed.

In deciding on funding for business development in disruptive circumstances, the applicant's financial standing and potential difficulties are exceptionally assessed only based on the latest confirmed financial statements. If the financial statements have not been submitted to the Finnish Patent and Registration Office, they must be submitted to Business Finland. If the company's financial situation has changed after the previous confirmed financial statements, the company can prove that the situation has improved by submitting an auditor's statement on the situation. The statement must show that the company is not a firm in difficulty based on the criteria presented above.