Access to finance
19 November 2009by Ina Dimireva -- last modified 02 July 2012
The Law on Small and Medium Size Business Development of the Republic of Lithuania that came into force on 1 January 2008 defines the types of small and medium size businesses, the forms of state aid available to them and other important relevant provisions.
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Business support organisations can advise businesses on how to find financing.
Resources
The law on small and medium size business (SME) development regulates the following:
- types of micro-, small and medium-size businesses;
- available forms of state aid;
- other important applicable provisions.
Law on Small and Medium-Size Business Development
State funding
Indirect support
- State guarantee for a loan
- State guarantees for the loans to large enterprises and companies experiencing temporary financial difficulties
- Micro-credits
- Small loans
Investicijų ir verslo garantijos UAB (INVEGA) provides guarantees (equivalent to state guarantees) to credit institutions for business development related loans to finance investments or working capital. INVEGA guarantees to credit institution up to 80 per cent (in some cases up to 90 per cent if the company is operating less than 12 months) of the loan.
A business has to ask any bank for a loan with a state guarantee and negotiate the terms of the loan. Then the bank will submit a request to INVEGA to grant a guarantee for the said loan.
From 2009 until 22 October 2010 in total 884 guarantees were granted for the value of 214.9 million litas while total amount of loans guaranteed was 290.2 million litas.
INVEGA provides loan guarantees to credit institutions for the loans to large enterprises and companies experiencing temporary financial difficulties. Guarantees for loans to these companies will be provided until 31 December 2010.
In the I-III quarters of 2010 three guarantees were provided for the value of 6.9 million litas, while total amount of loans guaranteed was 8.7 million litas.
It is a sum of up to 25 thousand euros being provided to an SME. There is a limitation on the interest rate on micro-credits; therefore this rate is smaller than on other loans. Micro-credits are currently being provided by Šiaulių bankas AB; Medicinos bankas UAB; and DnB NORD bankas AB. Banks have completely depleted the funds assigned for micro-credits and further lending is carried out from the repayments.
From 2006 until 30 June 2010 in total 785 businesses profited from the micro-credits at a value of 56.279 million litas.
These loans of up to 175 thousand litas are intended for financing investments and/or working capital of SMEs. The interest rate on these loans varies from 1.8% to 4.8% depending on the terms of the contract with the bank. Banks have completely depleted the funds assigned for credits and further provision of loans is carried out from the repayments. Small loans are being provided by Ūkio bankas AB; Šiaulių bankas AB; and Medicinos bankas UAB.
From 2009 until 30 September 2010 in total 224 businesses profited from the credits at a value of 24.5 million litas.
Investment and business guarantees
Financial support - Ministry of Economy
Small and medium business - Ministry of Economy
Direct support
INVEGA reimburses up to 50% of interest paid on loans, but not more than 5% of annual interest. Partial reimbursement applies to interest on loans for financing investments and working capital.
Access to EU funding
INVEGA Holding Fund
- Small loans - II (up to 350 thousand LTL)
- Open credit fund
- Partial reimbursement of interest
- JEREMIE Holding Fund
- Risk capital fund
- Business Angels Co-investment Fund
- Shared risk loans
- Portfolio guarantees
- Leader LT
- E-business LT
- Process LT
- New Opportunities
These loans are intended for financing investments and/or working capital related to business expansion. The average interest rate varies from 3.5 to 4.7. A recipient of a loan who is carrying out a project not in Vilnius, Kaunas or Klaipėda city municipalities can borrow under better conditions (lower interest rate). Banks have completely depleted the funds assigned for credits and further provision of loans is carried out from the repayments. These loans are being provided by Ūkio bankas, AB; Šiaulių bankas, AB; Medicinos bankas, UAB; and Parex bankas, AB.
From 2009 until 30 September 2010 in total 536 businesses profited from the credits at a value of 119.443 million litas.
Open credit line agreements are concluded with banks, which, upon making the decision to provide a credit that meets the set requirements, will request INVEGA to allocate OCF funds (no more that 75% of the credit amount) to finance business expansion. The maximum amount of such loan from the OCF - 1.5 million litas (banks must contribute at least 25% of their funds to this amount). Currently, the average interest rate is 5 per cent for a loan in litas and 4 per cent for a loan in euros. INVEGA has signed the agreements related to OCF with the Medicinos bankas UAB; Finasta bankas AB; Ūkio bankas AB; Citadelė bankas AB; Snoro bankas AB; Šiaulių bankas AB; and DnB NORD bankas AB.
From 2009 until 30 September 2010 in total 92 credits were granted; total value of granted credits - 67.5 million litas, with 50.6 million litas coming from the OCF.
INVEGA reimburses up to 50% of guaranteed interest, but not more than 5% of all annual interest. Partial reimbursement applies to interest on business expansion related loans for financing investments and working capital.
From 2009 until 29 July 2010 in total 24.5 million litas of interest were reimbursed.
On 1 October 2008, the JEREMIE Holding Fund was established, with the European Investment Fund (EIF) having been chosen as its manager.
The most important areas of different financial instruments are:
Under the instrument Risk capital funds on 23 April 2010 an agreement was signed with BaltCap, UAB, and on 1 June 2010 a contract was signed with LitCapital Asset Management, UAB, and following these agreements two risk capital funds were established. Out of 138 million litas (40 million euro) in the funds more than 96 million litas (28 million euro) came from EU structural funds. By default, the amount of investment that the Fund invests in one target company is up to 3 million euro (equivalent to 10.35 million litas) and 1.5 million euro (equivalent to 5.18 million litas) during any twelve-month period. At the moment the funds are preoccupied with the assessment and selection of investments. By 2015, each fund intends to invest in 8-12 companies.
On 21 January 2010 EIF signed an agreement with Mes invest UAB - selected administrator of co-investment fund. The contract value is 9.45 million euro, and it is expected that joint investments in SMEs will reach about 16.8 million euro. Business Angels Fund I, together with business angels (private investors) is planning to invest in small and medium-sized Lithuanian enterprises (1.38 million litas (0.4 million euro) per company). Investors will share the expertise and experience and will help companies to improve business management skills and to succeed in the long run.
More information on Business Angels Fund I
Business Angels Fund I already made 2 investments (contract value 0.72 million litas).
By 2015, Business Angels Fund I plans to invest in 30-40 companies. At the moment the fund is actively working on five potential investment projects.
In 2010, European Investment Fund (hereinafter - EIF) signed agreements with three banks: SEB bankas, Šiaulių bankas and Swedbank, to provide large credits to SMEs. Under this measure, around 1 billion litas will be lent to businesses along with private bank funds. Before 25 October 2010 banks have already granted 58 loans for 27.05 million litas.
Operational Programme for the Economic Growth
This is a measure for promoting investment by businesses which is aimed at increasing the productivity of or exports by businesses, or starting production of new goods.
Suitable applicants are private legal entities, except those classifiable as a micro-enterprise, that meet the conditions for support provision.
This is a measure that encourages micro-, small, and medium enterprises to implement information technologies thus creating favourable conditions for increasing enterprise productivity and exports.
Suitable applicants are private legal entities, classifiable as a small or medium enterprise, that meet the conditions for support provision.
This is a measure for encouraging small and medium enterprises to implement modern management methods and systems thus creating favourable conditions for increasing enterprise productivity and exports.
Suitable applicants are private legal entities, classifiable as a small or medium enterprise, that meet the conditions for support provision.
This measure is intended for encouraging enterprises to seek foreign partners more actively and increase sales in foreign markets.
Suitable applicants are private legal entities, except those classifiable as a micro-enterprise, that meet the conditions for support provision.
More information on these measures on a website of the Ministry of Economics
Various ways of funding projects are available in Lithuania, for example, own capital, various loans (including obligations), lease, forfeiting, factoring, venture capital funds, attracting international investment, and business angels.
Source: Your Europe
