Finance houses provide vital financing for investments

The dozens of finance houses operating in Finland include credit institutions, branches of foreign credit institutions, and companies that are members of multinational corporate groups. The Federation’s member finance houses belong to various banking groups. They are either authorised credit institutions, or otherwise subject to the Financial Supervisory Authority through their banking group.

Finance house operations refer to operations where a finance house provides financing for a purchase under an agreement it has signed either with the retailer or directly with the buyer. Finance houses provide hire-purchase financing, leasing and factoring.

Credit from a finance house usually requires no collateral security, as the claim or object of financing suffices as collateral for the loan. Some finance houses also provide unsecured credit like credit card and one-time credits.

The most important piece of legislation applied to the operations of Federation member finance houses is the Act on Credit Institutions.

Over the last few years, the sector has experienced tightening competition and a substantial increase in the number of foreign companies. On the other hand, many have pulled out of the market in the wake of the financial crisis, which in turn has strengthened the position of those finance houses which are members of banking groups.  They also have the benefit of their parent groups’ broad distribution networks and cross-selling possibilities.

The financial crisis has also given rise to increase in regulation, which will be one of the sector’s main challenges in the near future. The proposed changes to the IFRS accounting standards of leasing may also have significant effects on finance house operations.