New companies left without COVID-19 subsidies
The coronavirus also had dramatic impacts on consolidated companies.
TEK entrepreneurs also applied for COVID-19 subsidies granted by the state last spring. However, some companies were left without subsidies even though the pandemic halted their operations entirely.
The TEK members interviewed for this article wished to remain anonymous because of the on-going situations at their organisations.
– Our company operates in a new, international tech space. Building our business operations requires significant investments and long-term cooperation with various stakeholder groups, especially with client companies. In April last year, our client companies halted all development projects due to the uncertainty caused by the pandemic. This effectively reduced the number of incoming orders to zero for several months, says a TEK member.
The productional activity at this company only began in earnest in the early autumn of 2019. Even though the company’s turnover was modest, all indicators pointed to strong growth until April 2020.
Despite our collapsed order book, we are striving to keep developing our operations, and the COVID-19 subsidy would have been tremendously important to us.
– Despite our collapsed order book, we are striving to keep developing our operations, and the COVID-19 subsidy would have been tremendously important to us. However, despite several hearings, our application was denied. On the other hand, it was stated in phone conversations that the subsidy could not have been paid in full in any case, because our turnover for 2019 was so small.
Corona resulted in bankruptcy
The COVID-19 situation is also affecting consolidated companies in the tech sector. Another TEK member talks about the impacts the pandemic has had on a consolidated company operating an international business worth 30 million euros.
As the pandemic broke out, large client companies wished to negotiate new agreements because of the situation and significantly extended their payment schedules. Employees working abroad quickly returned to Finland because of COVID-19 restrictions, and they had to be laid off.
The pandemic caused significant additional costs and totally shut down exporting activities. One company in the consolidated group was granted a subsidy by Business Finland, but in practice the subsidy sum only covered two days’ worth of expenses.
The consolidated company also failed to meet other requirements of the COVID-19 subsidies because of long invoicing periods, layoffs and liquidity criteria. Ultimately, the bank pulled out of the company’s reorganisation plan and the organisation filed for bankruptcy. 170 employees lost their jobs.
– Submitting subsidy applications took a lot of work that did not result in funding because of artificial application criteria, even though the effects of the coronavirus were clear and significant, says a TEK member who worked for the organisation.
TEK members think that subsidy decisions should be based on overall consideration while questioning the formulaic grounds for granting subsidies.
TEK’s Entrepreneurship Committee is also of the opinion that the sector a company operates in and the nature of their business operations should be considered when making decisions on COVID-19 subsidies. The subsidies should be used to save healthy business operations that have been disrupted by the pandemic.
The subsidies should be used to save healthy business operations that have been disrupted by the pandemic.
– I am worried about what the subsidies will achieve and how taxpayers are to pay for them. Funding must provide tremendous leverage if the investments it enables are to bring multifold returns and benefit Finland’s national economy, says Arto Timperi from TEK’s Entrepreneurship Committee.
According to Timperi, when Business Finland granted COVID-19 subsidies last spring, it was done too hastily and mechanically.
– In the future, the subsidies should be granted at a calmer pace while monitoring how the situation develops. The development funds should be steered towards sectors with scalability and export potential. We are tech-intensive country that relies heavily on international cooperation, Timperi emphasises.
– The benefit gained from the COVID-19 subsidy should exceed the subsidy sum. On the other hand, the subsidy sum should be large enough to actually benefit the company. We hope that the coming EU stimulus package would result in impactful action that creates something new, says TEK’s entrepreneurship specialist Martti Kivioja.