Vækstfonden (The Growth Foundation) supports Danish companies by helping to finance R&D, internationalisation and skills development projects. It invests in early stage ventures that focus on life science and high tech, and provides mezzanine financing (a loan where the costs are dependent on the success of the firm) to a broad range of industries.
The Danish Growth Fund is a state investment fund that contributes to the creation of new companies by providing capital and expertise. Since 1992, The Danish Growth Fund has together with private investors co-financed growth in more than 6,000 Danish companies with a total commitment of more than DKK 17 billion. The Danish Growth Fund invests equity and provides loans and guarantees for small as well as medium-sized enterprises in collaboration with private partners and Danish financial institutions.
About policy instruments related to debt (excerpt from Nesta's ‘Idea Bank’ for Local Policymakers):
Debt is the most common means of external funding for small businesses in Europe. This may include bank overdrafts, credit card finance, loans from family and colleagues, bank loans and mortgages. Such debt is often personal in nature, frequently secured using the entrepreneur’s personal assets (e.g. their home) as a guarantee. This entails a significant personal risk for the entrepreneur – greater than other forms of finance – but has the benefit that the entrepreneur is not required to give up equity or control of the business.
Startups often struggle to raise debt because they lack the assets required to secure a loan or because banks are reluctant to lend to businesses without a proven track record. In addition, there is evidence that the more innovative firms are actually less likely to secure loans than their peers. Importantly, a significant proportion of small firms (40% according to one study) apply for finance within a week of needing it, meaning that speed of decision-making is important.
State support is typically focused on increasing the supply of capital (either directly or via commercial banks) and incentivising other financial institutions to lend money through standing as guarantor for loans. National examples include the Danish Growth Fund (‘Vækstfonden’), the British Business Bank (which is government-owned, invests via intermediaries such as banks, leasing companies) and the Dutch SME Loans Guarantee Scheme (‘BMKB’).