Small businesses with up to ten employees can benefit from the EIF guarantee from June. According to Linas Armalys, head of Noviti Finance, 82% of Lithuanian companies meet the criteria of the programme – and these are businesses that find it quite difficult to borrow from traditional banks.
“We disbursed the first EIF injection of €10 million in a much shorter time than the contract stipulated – just 16 months. Small businesses increasingly need to borrow for working capital or investment projects, and they need ever-larger amounts. The new EIF-guaranteed loans will be available for double the initial amount – €50 000 – without any collateral required and in many cases with only a partial surety,” says L. Armalys.
Last year, thanks to state measures and increased competition among financiers, conditions for business borrowing improved significantly. Almost 1.5 times as many Lithuanian companies turned to Noviti Finance last year compared to the year before. Of these, more than 800 small and medium-sized enterprises in the country were granted financing. The largest share of loans was granted to transportion companies, construction service providers, traders, and manufacturers. There was also an increase in the average loan amount, which reached almost €16,450 last year.
According to L. Armalys, the fact that an increasing number of companies are looking for financing from alternative financiers is also due to the attitude of traditional banks.
“Traditional banks are focused on medium and large businesses and are generally reluctant to provide loans of less than €100 000. In addition, banks have quite strict requirements for borrowers – the company must have been in business for at least three years and must have collateral. However, small businesses usually do not have collateral and need to borrow relatively small amounts – a few tens of thousands of Euro,” says L. Armalys.
The state has also contributed to the increased interest of businesses in alternative finance. The INVEGA interest compensation facility for investment loans and state business incentives, such as Alternatyva, designed to finance business investments or to cover working capital shortages, have had an impact, opening up more opportunities for SMEs to obtain loans on more favourable terms. Noviti Finance disbursed 62% of the total loans under Alternativa.
The number of Noviti Finance clients also increased in neighbouring Latvia. The number of SMEs financed in the neighbouring country exceeded 200, with almost €2 million in loans.