Recent Economic Cycles

Recent economic cycles have significantly affected the Swedish loan market. Following a protracted recession that began in 2022, the Swedish economy has been in a recovery phase since 2025, with GDP growth and household consumption trending upward. The escalation of geopolitical tensions in the Middle East from February 2026 temporarily dampened the pace of recovery, mainly through higher global energy prices, but growth has since regained momentum, with GDP rising markedly in the second quarter of 2026. Notwithstanding this improvement, the economy is still assessed to be in a low-growth phase, with resource utilisation and employment yet to reflect the recovery in output fully. A fully balanced economic cycle is not expected until 2027. Against this background, banks and other lenders continue to adopt a fairly cautious stance towards borrowers in general, albeit a less restrictive one than during the height of the 2022–2023 downturn.

Inflation has slowed somewhat over the past year, leading the Riksbank (Sweden’s central bank, Riksbanken) to lower its policy rate in several steps, from 2.50% in January to 1.75% in September 2025, where it has remained since. Despite these measures, credit growth remains subdued, and overall corporate insolvency levels, while easing during the first half of 2026, remain historically elevated, with renewed upward pressure in certain sectors (including transport and real estate). Borrowers in interest-rate-sensitive sectors, particularly commercial real estate, continue to face refinancing and covenant pressure, resulting in workouts and restructurings. Leveraged borrowers tend to seek alternative financing sources when refinancing, given the more cautious approach from lenders. Banks may face increased competition from alternative lenders, not least funds providing credits.

The Nordic high-yield bond market closed 2025 with record annual issuance of EUR21.8 billion, up 22% from EUR17.9 billion in 2024, driven by strong refinancing demand and rising international participation, and has entered 2026 with continued momentum. Credit conditions remained broadly resilient throughout 2025 despite periods of volatility – spreads widened temporarily in April 2025 amid a global risk-repricing episode but normalised by year-end, supported by stable fundamentals and sustained institutional demand. Nonetheless, recurring bouts of geopolitical and trade tensions during 2025 and into 2026 have contributed to episodes of falling stock markets and higher government bond yields, temporarily reducing market risk appetite. Despite this volatility, there are clear signs of stabilisation, and the overall expectation is for further improvement in the economic cycle during the remainder of 2026 and into 2027.

Regulatory Environment

The most significant recent regulatory development concerns the implementation of the EU banking package. On 3 June 2026, the Swedish Parliament adopted the government bill implementing amendments to the EU Capital Requirements Directive (Directive 2013/36/EU) introduced under that package, principally amending the Swedish Banking and Financing Business Act (SFS 2004:297) and the Swedish Act on Special Supervision of Credit Institutions and Investment Firms (SFS 2014:968).

Among other things, the reform introduces a licensing requirement for third-country undertakings wishing to provide core banking-related services from a branch in Sweden, extends suitability requirements for management to certain very large investment firms and holding companies, and introduces prior notification requirements for new members of management. Most of these changes entered into force on 1 July 2026, with the licensing regime and supervisory requirements for third-country branches taking effect on 11 January 2027.

The consumer credit market has also been subject to significant changes in order to strengthen consumer protection, as the Swedish government has increased its focus on this sector in light of rising over-indebtedness and the growing prevalence of high-cost short-term loans. Until recently, the Swedish consumer credit market was subject to less strict regulation than that applicable to banks and other credit institutions. Under the legislative amendments, which entered into force on 1 March 2025 (in respect of the interest and cost caps) and 1 July 2025 (in respect of the extended licensing regime), companies engaged in consumer credit activities must generally comply with the same regulatory requirements as banks and other credit institutions in order to continue such operations. Among other measures, the reform abolished the previous concept of “high-cost credit” and extended the interest cap (now the applicable reference rate plus 20 percentage points, down from 40) and a cost cap (broadly, total credit costs may not exceed the original loan amount) to substantially all consumer credits other than residential mortgage credits. Companies that held a licence or benefited from an exemption under the previous regime may continue to operate under that regime during a transitional period starting on 31 July 2026, provided that an application for a licence under the Swedish Banking and Financing Business Act is submitted to the SFSA no later than that date. The changes are expected to reduce volumes in the consumer credit market and decrease the number of consumer credit providers.

In addition, during 2026 a new Swedish Consumer Credit Act (SFS 2026:1011) was adopted implementing the EU’s recast Consumer Credit Directive (Directive (EU) 2023/2225), which will enter into force on 20 November 2026 and fully replace the current Swedish Consumer Credit Act (SFS 2010:1846).

On the residential mortgage side, the Swedish Act on the Limitation of Residential Credits (SFS 2026:226) entered into force on 1 April 2026, replacing the SFSA’s previous regulations and general guidelines on mortgage caps and loan-to-value-based amortisation requirements with a statutory framework. Among other things, the mortgage cap for new residential credits was raised from 85% to 90% of the property’s market value, and the additional income-based amortisation requirement introduced in 2018 was abolished, while the general loan-to-value-based amortisation requirements remain unchanged.

Geopolitical conflicts and increased uncertainty continue to shape risk appetite in the Swedish loan market. Both banks and alternative lenders have adopted a more cautious approach towards borrowers, and volatility has, if anything, increased owing to a series of geopolitical uncertainties during 2026, including a renewed regional conflict in the Middle East from February 2026, which briefly disrupted global energy markets. While the Swedish krona has strengthened markedly since 2025 and a trade agreement reached in mid-2025 between the EU and its largest trading partner has removed some trade-related uncertainty, currency volatility and residual trade policy disputes continue to affect lending conditions. These factors have, in combination, resulted in continued caution among lenders when refinancing highly leveraged borrowers, as reflected in the following trends.

Global trade uncertainty caused many companies to postpone investments during 2025 and early 2026, particularly during periods of acute tariff-related uncertainty between the EU and the US, putting pressure on earnings and weakening the financial position of highly leveraged companies. Given the continued cautious lending environment, banks remain selective, focusing on companies with predictable cash flows; high-risk projects continue to find it more difficult to raise loan financing than during the pre-2022 period. After several years of covenant-light loan financings with low interest rates and borrower-friendly terms, the market has continued to be characterised by comparatively stricter covenants, higher pricing and lower leverage, notwithstanding some recent easing as the Swedish economy has shown clearer signs of recovery.

Sweden, with its many fintech start-ups and real estate companies, has been an attractive market for investors over the years. Following the protracted downturn that began in 2022 and the gradual recovery under way since 2025 (see 1.1 The Regulatory Environment and Economic Background), both banks and other lenders have retained a fairly cautious approach towards borrowers in general. The Swedish bond market generally offers borrowers less strict and more flexible covenants compared to traditional bank loan financing.

Given the global conflicts and geopolitical uncertainties in the financial market, issuers have at times raised smaller amounts of new debt in the bond market. The high-yield market has nonetheless shown clear signs of recovery following the sharp slowdown in 2022–2023, with issuance volumes and investor demand improving as interest rates have stabilised. At the same time, the rapid growth of the global private credit market – encompassing direct lending, asset-based finance and other non-bank credit strategies – has continued to accelerate, providing borrowers with an increasingly established alternative or complement to syndicated bank and bond financing. Within syndicated structures, the flexibility to reallocate amounts between different tranches in multi-tranche facility deals (structural flexibility) has also been used more frequently to facilitate syndication processes.

Real estate remains the largest sector in the Swedish high-yield market, although its share of the total outstanding amount has continued to decline from the elevated levels seen during the 2022–2024 downturn. Financing conditions for the sector have gradually improved through 2026 as interest rates have stabilised and transaction activity has picked up, though the sector’s overall share of the market remains below its earlier peak. The Nordic high-yield market has continued to show strong momentum into 2026, building on record issuance volumes and a growing issuer base in 2025, with a more active primary and secondary market than in much of Europe and the US.

In recent years, alternative credit providers have offered borrowers an alternative to traditional bank loan and bond financing. Such providers may include direct lenders, credit funds, crowdfunding platforms and peer-to-peer lenders, and may offer faster funding and more flexible terms than those typically available on the traditional loan market.

The share of loans provided by alternative lenders in the Swedish market continues to increase. Credit funds, direct lenders and peer-to-peer lenders offer alternative financing (particularly for small and medium-sized companies) to traditional bank loan financing and bond financing. Financing through HoldCo structures has also increased, often in combination with payment-in-kind (PIK) interest and structured subordination to senior loans.

The Swedish fintech sector has grown significantly in recent years, resulting in new market entrants offering more flexible financing solutions and an overall increasing number of companies offering banking as a service. Other direct lenders – not least institutional investors – also offer an alternative to traditional bank loans for borrowers on the corporate market.

The sustainability trend in the Swedish loan market continues to strengthen, with an increasing number of corporate borrowers entering into sustainability-linked loans with traditional banks. Key performance indicators in sustainability-linked loans are also continuing to develop, with market standards becoming increasingly established.

Concurrently, the surge in green projects – particularly onshore wind power projects – has previously led to increased issuance of green loans in the Swedish market. However, some high-profile onshore wind projects have encountered severe financial difficulties in recent years, most notably where developers entered into long-term power purchase agreements (PPAs) with fixed output assumptions that did not materialise, forcing the relevant project company to purchase replacement electricity on the spot market at a loss. In at least one high-profile case, this led the project company to seek a court-supervised company reorganisation. These cases have made lenders more attentive to merchant price risk and PPA structuring when financing similar projects, even as overall market appetite for green and sustainability-linked lending remains strong.

Providing loan financing to Swedish companies is not itself subject to a licence. However, such activities generally fall within the scope of the Swedish  Certain Financial Activities Act (SFS 1996:1006), provided that they are carried out on a professional basis, for which the threshold is rather low. In such cases, the provision of loan financing generally requires registration with the SFSA.

Banking and Financing Activities

Banking and financing activities are subject to extensive regulation in Sweden and fall within the scope of the Swedish Banking and Financing Business Act (SFS 2004:297). In short, banking services include:

• processing payments via general payment systems; and
• receiving funds that are repayable to the creditor within 30 days of notice.

Financing business includes:

• accepting repayable funds from the public; and
• granting loans, providing guarantees or conducting certain leasing (acquiring claims) activities.

Additionally, only credit institutions may conduct business with the purpose of providing or intermediating credit, which is why a licence as a credit institution is necessary to conduct such activities.

Where financing activities require a licence as a credit institution (ie, registration pursuant to the Swedish Certain Financial Activities Act is not sufficient), there are generally only a few alternatives for entities to provide financing to a Swedish company.

Foreign credit institutions

Foreign credit institutions holding a licence in another European Economic Area (EEA) country may submit a passporting notification to the competent authority in that entity’s home member state in order to provide regulated banking services in another EEA country, including Sweden. The competent authority will review the notification and notify the SFSA that such entity will provide services in Sweden. Such entity will thereafter be permitted to provide its regulated banking services on a cross-border basis from its home member state into Sweden.

Alternatively, such institutions may elect to establish a branch or representation office in Sweden. In that case, the credit institution must submit a notification to the competent authority in its home member state, which must include (for instance) a business plan.

Non-authorised entities and third-country credit institutions

Entities that do not hold a credit institution licence in another EEA country should apply for a licence with the SFSA in order to conduct banking or financing business in Sweden. Application details may vary depending on the relevant licence and the extent of such licence. However, the following items are typically included:

• a detailed business plan describing (inter alia) the business, the organisation, the services, any outsourcing arrangements and the ownership structure;
• policies regarding (inter alia) credit granting, internal governance, risk management, remuneration and business continuity;
• financial projections for the next three years;
• ownership and owner executive assessments; and
• management assessments.

Credit institutions based outside the EEA may, in order to provide their banking or financing business in Sweden, submit an application with the SFSA to establish a branch in Sweden.

Foreign lenders are generally under the same restrictions from providing loans on the Swedish market as Swedish lenders. Accordingly, foreign lenders providing loans in Sweden may be required to register with or obtain a licence from the SFSA or their home member state competent authority (see 2.1 Providing Financing to a Company).

Some countries are considered as “high-risk third countries” from an anti-money laundering (AML) perspective, which can impede or even forbid such business from being operated. The same applies to foreign lenders that fall within the scope of sanctions.

Foreign lenders are not restricted or impeded from receiving security or guarantees.

Foreign currency exchange controls are not imposed in Sweden and there are generally no restrictions on commercial transactions in this regard.

It should be noted that certain financial institutions are subject to reporting requirements for specific cross-border payments. Such reports must be submitted to the Riksbank.

There are no general restrictions under Swedish law on the borrower’s use of proceeds from loans or debt securities. However, specific restrictions apply in certain cases, such as financial assistance (please see 5.3 Downstream, Upstream and Cross-Stream Guarantees and 5.4 Restrictions on the Target) and transactions not permitted under AML and sanction regulations.

It should also be noted that the use of proceeds is typically regulated in the loan agreement between the lender and the borrower, which often contains restrictions on the use of proceeds similar to those of the Loan Market Association (LMA).

Agents

The concept of agents is recognised in Sweden and is commonly used in structured financing transactions, both in relation to an agent appointed by the lenders to act on behalf of the loan syndicate towards the borrower as well as in the appointment of a security agent to act on behalf of the secured parties in relation to the security for the financing in question.

Trusts

The concept of trusts is not recognised in Sweden.

Lenders may generally transfer loans, together with the existing security package, to a third party. Strong borrowers – most commonly investment-grade companies or borrowers backed by private equity sponsors – may successfully negotiate to limit loan transfers to a certain group of pre-approved lenders or financial market participants regularly engaged in lending business on the Swedish market.

The relevant security package should be transferred in connection with the loan transfer, as Swedish law requires that there be an existing or future debt in order for the security interest in relation thereto to be valid. Due perfection of the security package should be taken into consideration in connection with a transfer of the loan and the security package to a new lender.

Swedish law does not restrict debt buybacks, but Swedish law-governed facility agreements generally contain standard LMA-based restrictions in this regard. Debt buybacks are uncommon in the Swedish loan market, as most transactions are syndicated loans with a limited secondary market activity.

Before an offeror makes a tender offer (public takeover bid) in respect of a Swedish company whose shares are listed on a Swedish stock exchange, the offeror must have secured funding to complete its tender offer. A tender offer should (among others) include a description of the financing arrangement, meaning that the offeror needs to describe any third-party financing (including conditions for such financing arrangement). In addition, to ensure transparency and fairness for the target shareholders, the offeror is obliged to comply with rules on strict time limits and notification periods.

Certain fund provisions are not only used in the context of public acquisition finance – the use of these provisions is also quite common in relation to private equity transactions.

The increasing number of sanctions imposed on Russia, Belarus and entities established and/or connected thereto have caused changes in legal documentation in relation to borrowers with some kind of Russian or Belarusian connection. Lenders continue to apply heightened scrutiny to sanctions provisions in light of the ongoing conflict in Ukraine and the evolving international sanctions regime. Commercially, activity remains strong in renewable energy, and ESG considerations continue to be integrated across bank and bond products, with sustainability-linked features being increasingly standard.

Usury is considered a criminal offence under the Swedish Criminal Code (SFS 1962:700).

Where a person exploits someone else (eg, due to distress, lack of understanding or similar) when entering into an agreement or some other action with legal consequences with the purpose of benefitting therefrom, and the benefit is clearly disproportionate to the consideration or for which no consideration is to be paid, it is considered usury.

Usury also arises where a person, in the course of business or other large-scale activities, provides credit and obtains interest or another financial benefit that is clearly disproportionate to the consideration.

In respect of commercial transactions, there are no clear limits on what interest rates would be considered usury. Such limits are therefore determined on a case-by-case basis.

It may also be noted that an interest rate provision can be modified or set aside if considered to be unfair or unreasonable pursuant to the Swedish Contracts Act (SFS 1915:218). However, the threshold for a contractual provision to be considered unfair or unreasonable in a commercial relationship is rather high.

Further, there is an interest rate cap, calculated as the reference rate plus 20%, in respect of certain high-cost credits provided to consumers pursuant to the current Swedish Consumer Credit Act (SFS 2010:1846), which will be repealed and replaced by the new Swedish Consumer Credit Act (SFS 2026:1011) on 20 November 2026. Such high-cost credits (excluding certain credit purchases and housing loans) generally relate to consumer consumption.

There is no specific Swedish regulation regarding disclosure of certain financial contracts.

Payments of principal or interest to foreign lenders are generally not subject to withholding tax under Swedish law, provided that such lenders are entities not organised under Swedish law and that do not conduct business activities from a Swedish permanent establishment.

There are no other specific major restrictions, consents required for approval, or significant costs associated with granting security or guarantees under Swedish law. However, the issuance of new business mortgage certificates and property mortgage certificates will require a stamp duty to be paid in connection with the issuance. Such stamp duty is a one-time cost, and such certificates may, after issuance, be reused without additional stamp duty being paid.

Business Mortgage Certificates

The stamp duty for the issuance of a new business mortgage certificate is currently 1% of the face value of the business mortgage certificate.

Property Mortgage Certificates

The stamp duty for the issuance of a new property mortgage certificate is currently 2% of the face value of the property mortgage certificate.

Other Assets

Security over ships and aircraft is also subject to stamp duty.

Fees

Minor application fees will be payable in addition to the payments of stamp duty as described above.

Foreign lenders, being entities not organised under Swedish law and that do not conduct business activities from a Swedish permanent establishment, are generally not subject to Swedish income tax in respect of payments of principal amounts or interest of loans. However, lenders based in Sweden may be subject to taxation in respect of income that derives from certain capital assets, such as interest. Foreign lenders, including non-money centre bank lenders, should therefore carefully consider their operations and potential permanent establishment in Sweden to have visibility on their situation from a Swedish law tax perspective.

Under Swedish law, a security interest can generally be created over any asset as such. The most common types of assets that security is created over are shares, real property, cash deposited in bank accounts, receivables and business mortgages.

A binding agreement between the pledgor and the pledgee is required under Swedish law to create a security interest. Such security agreement may be made in oral form or – as is the case in almost all commercial transactions – written form.

Due perfection of the most commonly used assets that security is created over is made as follows.

Shares

Security can be taken over shares in a limited liability company, and such security interest is commonly created by way of a pledge. Perfection of the security interest created over the shares – represented by physical share certificates issued by the company – requires that the physical share certificates representing the pledged shares be handed over to the pledgee, that notice be provided to the company whose shares are subject to the pledge, and that the pledge be registered in such company’s share register.

In relation to companies whose shares are electronically registered with the Central Securities Depository, perfection of the security interest is made by way of:

• registration if the shares are held in the owner’s name; and
• notice to the relevant custodian if the shares are being held by a custodian.

Real Property

Security over real property is created by way of pledging mortgage certificates representing a certain sum and a certain ranking in relation to the real property.

Perfection of a pledge of physical mortgage certificates is perfected by way of handing over the physical mortgage certificates to the pledgee. In relation to a pledge over electronic mortgage certificates, perfection is made by way of registration with the Swedish Land Registration Authority (Lantmäteriet).

Business Mortgage (Floating Charge)

Security can be taken over business mortgages (floating charges) covering certain movable property (such as inventory, claims and similar) of the security provider. A business mortgage does not include cash, proceeds in bank accounts, financial instruments and similar assets. Business mortgage certificates will represent a certain sum and ranking in relation to business mortgages in respect of a company.

Security over physical business mortgages is perfected by way of handing over the physical business mortgage certificates to the pledgee. Security over electronic business mortgage certificates is perfected by way of registration with the Swedish Companies Registration Office (Bolagsverket).

Receivables

Due perfection of a pledge of receivables is created by way of notice to the debtor and the pledgor being restricted from receiving payments of such contractual claims.

In respect of so-called negotiable promissory notes (löpande skuldebrev), which embody the underlying claim, due perfection requires that such promissory notes be handed over to the pledgee.

Cash in Bank Accounts

A pledge over cash deposited in a bank account is perfected by way of notice to the account bank and the pledgor being restricted from disposing of the funds in the bank account.

General Security Concepts

There is no general security interest recognised under Swedish law that covers all assets of the security grantor. However, security may be taken over business mortgages (floating charges), represented by business mortgage certificates and covering certain movable property (such as inventory, claims and similar) of the security provider. A business mortgage does not include cash, proceeds in bank accounts, shares or other financial instruments.

There is no restriction on including different types of assets over which security is created under one general security agreement, but specific perfection requirements for each type of asset should then be taken into account. However, in Swedish loan financings there will typically be different security agreements covering different types of assets subject to security.

Swedish limited liability companies (aktiebolag) may not grant monetary loans, security or a guarantee for monetary loans to shareholders, board members, managing directors, certain relatives and spouses/co-habitants (sambo), or to any person who, alone or together with others, exercises a controlling influence in the company or another company in the same group.

A “group” means any other group of undertakings of a corresponding nature in which the parent company is:

• a Swedish legal entity that is obliged to maintain accounts pursuant to the Swedish Accounting Act (SFS 1999:1078);
• a corresponding foreign legal entity domiciled within the EEA; or
• a municipality, county council or association of local authorities.

However, there are exemptions in cases where the borrower is a municipality or similar, or where the loan was obtained from the Swedish National Debt Office pursuant to Chapter 5 of the Swedish Budget Act (SFS 2011:203). Further, there is an exemption where the borrower is a company within the same group as the lending company, or where the loan is intended exclusively for the borrower’s business operations and the company provides the loan for purely commercial reasons.

There is also an exemption regarding loans and granting of security to a shareholder or connected persons where the total shareholding in the company held by the borrower and connected persons does not amount to 1% of the share capital.

Advances, loans or security may, however, never be provided where full coverage for the restricted share capital is thereafter not available. When calculating whether full coverage for the restricted share capital is available, advances and loans pursuant to the first foregoing paragraph shall be treated as receivables of no value and security pursuant to the first paragraph shall be treated as a liability of the company.

Transactions in which a limited liability company provides a loan or grants a security or guarantee may be limited or even void if the transaction reduces the limited liability company’s net worth, and if such transaction is not deemed to have corporate benefit for that limited liability company. These transactions are referred to as “value transfers” under Swedish law. As regards downstream guarantees, these are typically considered to have corporate benefit if the subsidiary is wholly owned by the parent company. In relation to upstream or cross-stream guarantees, the limited liability company guaranteeing obligations of another legal entity must carefully consider whether the transaction has sufficient corporate benefit, which in some cases may be that the subsidiary accesses more favourable financing terms and conditions on a group basis.

A Swedish limited liability company is generally prohibited from granting an advance or providing loans or security for loans in order that the debtor or any natural or legal person connected thereto, as referred to in Chapter 21, Section 1 of the Swedish Companies Act (SFS 2005:551), shall acquire shares in the company or any parent company in the same group. This financial assistance prohibition generally does not cover refinancings or security take-ups involving the target company and that are made some time (market standard is somewhere between approximately 30 and 90 days) after the acquisition of the target company has been completed.

Please see 4.2 Other Taxes, Duties, Charges or Tax Considerations.

Release mechanisms are generally governed by the relevant security agreement, together with a general release clause typically included in an intercreditor agreement. Intercreditor agreements governing the release of assets pledged under Swedish law generally grant the security agent a discretionary power to release the relevant security, as automatic release clauses may negatively affect the perfection of the relevant security interest.

Release of Security Over Monetary Claims

Release clauses in relation to security over monetary claims – such as insurance proceeds, claims under material contracts and similar claims – usually require the security agent, on behalf of the lenders, to notify the relevant debtor of the security release.

Release of Security Being Held in the Possession of the Pledgee

Release clauses in relation to pledged assets that have been perfected by way of coming into the possession of the pledgee usually require that the pledgee return the relevant asset to the pledgor. This applies to non-electronic business mortgage certificates, non-electronic property mortgage certificates and share certificates.

Release of Security Registered in a Certain Register

Release clauses in relation to security that has been registered in a certain register usually require that a de-registration of such security interest be made in the relevant register. This applies to electronic business mortgage certificates, electronic property mortgage certificates, as well as shares and other securities registered with a securities depositary.

Parties involved in a Swedish loan financing generally address competing security interests by way of entering into a subordination agreement or an intercreditor agreement, in which a contractual priority between different lenders or groups of lenders may be created. Such agreements are generally based on LMA standards.

A duly perfected security interest in relation to a certain asset will generally have priority ahead of other claims, such as third-party creditors or a bankruptcy receiver in the pledgor’s bankruptcy. However, statutory claw-back periods must be considered in this regard; see 7.1 Impact of Insolvency Processes.

See also 7.2 Waterfall of Payments for an overview of the priority between creditors in the event of a bankruptcy.

Third-Party Security Interests

In some cases, third-party security interests can be created by operation of law.

A retention of title over certain goods and assets can result in a seller of such goods or asset having a better priority than a secured lender. A valid retention of title must (among other requirements) be created prior to the relevant goods or asset having been transferred. Also, if the buyer of the goods or assets is permitted to consume or sell the goods or assets, this may negatively affect the validity of the retention of title.

Certain movable property remaining in the possession of the seller may have priority ahead of other creditors if the sale has been duly registered with the Swedish Enforcement Authority (Kronofogdemyndigheten).

Enforcement of security is typically carried out by way of an auction sale. Under Swedish law, a pledgee has a fiduciary duty to take into account the interest of the pledgor when enforcing the security. This means that the pledgee should seek to realise a fair market value of the asset being realised given the circumstances at hand. Further, a security may only be enforced to the extent that it secures the debt owed, and any excess proceeds from an enforcement sale should be paid to the pledgor.

Security agreements generally regulate the circumstances in which security may be enforced. If the parties have not agreed on how enforcement should be done, the pledgee may seek enforcement assistance from the Swedish Enforcement Authority.

Enforcement of property mortgage certificates and business mortgage certificates is limited to being made through a public sale process at the Swedish Enforcement Authority.

In addition, there is a forfeiture prohibition under Swedish law restricting a pledgee from assuming ownership of the pledged asset if such acquisition is not made in fair competition with other potential acquirers on the market, which adds to the reasons for arranging an auction sale of the relevant asset.

Swedish courts generally recognise the choice of foreign law to govern contracts, subject to conflicts with public policy (ordre public). Foreign law contracts may be enforced in Sweden provided that Sweden has jurisdiction over them. Waivers of immunity are generally legally binding and enforceable under Swedish law.

Judgments given by a foreign court may be enforceable in Sweden under the Hague Convention, the Brussels I Convention or the Lugano Convention.

Arbitral Awards

Sweden is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the “New York Convention”), meaning that all arbitral awards issued by a connected party thereunder are enforceable in Sweden.

There are generally no restrictions in relation to a foreign lender’s ability to enforce its rights under a Swedish law-governed loan agreement or Swedish law-governed security agreement.

Swedish entities that have been declared bankrupt will, by operation of law, have their assets managed by an appointed bankruptcy receiver, who will manage the insolvency process and ensure that the total assets of the bankruptcy estate – after certain deductions – are being distributed among the relevant creditors in a certain order. Perfected security may still be enforced by way of auction sale in such scenario, although an insolvency process may delay the sale process of certain assets.

It may be noted that there are different types of claw-back periods under Swedish law, which means that certain transactions may be recovered by a bankruptcy receiver for the benefit of the bankruptcy estate if such transactions have been made within the relevant claw-back period. For example, there is a three-month claw-back period regarding newly granted security provided in respect of existing debt, which generally affects security assets with delayed perfection.

Under Swedish law, there are several tiers of priority between creditors in the event of insolvency of a borrower:

• special priority right, ie, claims that are connected with a particular collateral (such as security over real property or other pledge);
• general priority right, eg, costs that are connected with initiating the insolvency proceeding;
• unprioritised claims, ie, any assets remaining after creditors under the two points above have been paid should be divided between the creditors in this category; and
• subordinated claims.

The priority order of special priority rights is listed in Sections 3a to 7 of the Swedish Priority Rights Act (SFS 1970:979). Before any creditors are paid in the above priority order, certain costs related to the administration of the bankruptcy estate, as well as fees to the bankruptcy receiver, should generally be paid. Any remaining amount after repayment of debt has been made in full should be distributed among the shareholders.

The concept of a secondary pledge is recognised under Swedish law, whereby two creditors may agree that a secondary pledge be made over an asset, giving the secondary pledgee a subordinated right to the pledge.

Parties involved in a Swedish loan financing generally address competing security interests by entering into a subordination agreement or an intercreditor agreement, in which a contractual priority between different lenders or groups of lenders may be created. Such agreements are generally based on LMA standards.

If a company itself submits a bankruptcy filing to the relevant court, the court usually issues its decision on the very same day. If a creditor files for bankruptcy, the court will generally take up to two weeks or more due to negotiations between the parties involved.

The insolvency process itself can vary in length, from a few weeks to many years. The bankruptcy receivers are obliged by law to ensure that all assets are managed in the best way possible and that the priority order between different creditors is followed.

Companies with temporary financial problems may apply for a company reorganisation (företagsrekonstruktion) in order to achieve a more viable financial situation by way of not allowing enforcement actions taken by creditors during the reorganisation period. A reorganisation will also generally involve the creditors, whereby the company’s debts are reduced to a certain extent by agreement.

On 1 August 2022, the new Swedish Reorganisation Act (SFS 2022:964) entered into force, implementing the EU Directive on restructuring and insolvency, ie, Directive (EU) 2019/1023. This resulted in substantial changes to the measures available in corporate reorganisations. Courts must generally apply a stricter approach when assessing whether a reorganisation is appropriate for the relevant company – the so-called viability test. A legally binding reorganisation plan may be established, setting out (among other things) the parties involved, actions to be taken during the reorganisation, and the timing aspects thereof. Conversion of debt to equity (by way of debt-to-equity swaps) can form part of the binding reorganisation plan. In addition, cross-group cram-downs may include not only unsecured creditors (as was the case previously) but also secured creditors.

Informal processes outside court-supervised restructuring are also common and may include tailored solutions that take into account the specific circumstances of the case.

If the borrower, security provider or guarantor were to become insolvent, the lenders would face the risk of not receiving part of or the entire loan amount (including interest, both accrued and future). Lenders may also need to take into account claw-back periods of granted security and ensure that any security granted to the lender is duly perfected.

In recent years, there has been significant activity in onshore wind power projects in Sweden, driven by an increased level of transition to renewable energy and fuelled by political promotion of such energy sources (see also 1.6 ESG/Sustainability-Linked Lending). These projects are primarily located in non-residential areas in the north and, to a lesser extent, the south of Sweden. Large wind power parks have been built and financed by project financing during the establishment phase and subsequently sold to (for instance) large institutional investors. These project financings are often complex and generally attract interest from foreign lenders and investors. However, the development of new wind power projects has slowed down due to a debated veto right for municipalities.

Public-private partnership (PPP) transactions are not very common in Sweden. Nevertheless, two high-profile PPPs in Sweden are the construction of Nya Karolinska (a hospital located in Stockholm) and the construction of Arlanda Airport Express (a railway from the city of Stockholm to Arlanda Airport).

Swedish courts generally recognise the choice of foreign law to govern contracts, subject to conflicts with public policy (ordre public), and foreign law contracts may be enforced in Sweden provided that Sweden has jurisdiction. Project documents may therefore be governed by foreign law; however, certain documents must comply with local law requirements – for example, security agreements where Swedish law perfection requirements apply. Issues governed by mandatory local legal principles will always be subject to local law, regardless of any contractual choice of foreign law.

English and New York local court judgments are, as a rule, not recognised or enforceable in Sweden without a retrial on the merits. However, the foreign judgment may serve as strong evidence in the case. Certain English court judgments in civil and commercial matters may be recognised and enforceable in Sweden pursuant to the Hague Convention, which applies to certain international cases with an exclusive choice-of-court agreement.

International arbitration is always available to the parties, where arbitration is possible.

Foreign direct investments in such companies of at least 10% of the total shares or votes (with further thresholds at 20%, 30%, 50%, 65% and 90%) require prior notification to, and approval by, the Swedish Inspectorate of Strategic Products (Inspektionen för Strategiska Produkter, ISP). Non-compliance with the FDI Act may result in fines of up to SEK100 million. The FDI Act has a significant impact on many transactions and may delay or restrict certain foreign direct investments. Notably, it applies irrespective of the investor’s nationality, meaning that purely domestic transactions may also be caught. New regulations issued by the Swedish Civil Defence and Resilience Agency (Myndigheten för civilt försvar, MCF) (MCFFS 2026:13) further widen the scope of “essential activities” (Sw. samhällsviktig verksamhet) covered by the FDI Act from 15 July 2026. In addition, a new EU regulation on the screening of foreign investments, Regulation (EU) 2026/1386, entered into force on 16 July 2026, replacing Regulation (EU) 2019/452 and introducing a harmonised framework requiring all EU member states to maintain a mandatory screening mechanism, including minimum common review periods.

As described in 5.4 Restrictions on the Target, Swedish law imposes financial assistance restrictions, which need to be taken into account in relation to Swedish acquisition financings in respect of a target company that is a Swedish limited liability company. In short, this means that such target company may not – with a few exemptions – provide loans or grant security for the acquisition of the shares in the target company itself.

Further, corporate benefit issues may also need to be carefully considered when structuring deals, to ensure that companies granting security or guarantees are deemed to receive sufficient corporate benefit of the transaction at hand. In many deals, the corporate benefit for a group company granting security or guarantees for the benefit of its parent company may lie in the group as a whole receiving financing on terms and conditions that would not be available to a company on a standalone basis. However, this has to be thoroughly assessed on a case-by-case basis.

The majority of Swedish project finance activity relates to renewable energy projects, and more specifically to onshore wind power projects. The typical financing source for these projects is bank loans borrowed by a project company, being a special purpose vehicle established for the specific project. The project company generally enters into the relevant finance agreements, in many cases guaranteed by a parent company. The structure is set up to facilitate a sale of the whole project to a third party at a later stage. Sponsors generally contribute capital to supplement the loan financing. Lenders are most commonly based within the EU and the financings are either bilateral financing arrangements or syndicated deals.

Northern Sweden has significant natural resources, and many large companies have commenced high-profile green industrial projects in the region. These business projects are often complex and capital-intensive, and may encounter issues with local property owners (in many cases municipalities), local infrastructure and environmental permits.

Environmentally hazardous activity requires an environmental permit pursuant to the Swedish Environmental Code (SFS 1998:808). Certain projects may therefore need environmental permits, which should be taken into account in project financings. Most applications are submitted to the local County Administrative Board, while projects with a more significant environmental impact (such as mining and industrial projects) must obtain a permit from the relevant Land and Environment Court (Mark- och miljödomstolen). Such processes generally involve consultation with other concerned parties regarding the contemplated activities, which can be time-consuming.

The Swedish Work and Environment Act (SFS 1977:1160), supplemented by certain rules issued by the Swedish Work Environment Authority (Arbetsmiljöverket), generally regulates the work environment; it aims to prevent work accidents and ill health as well as to foster a good working environment.