The Lithuanian Ministry of Finance and the European Investment Fund (EIF) have announced substantial new support for Lithuanian SMEs in the context of the Pan-European Guarantee Fund (EGF). Guarantee agreements with five Lithuanian financial intermediaries will make available up to an additional €364 million in new financing for businesses dealing with the economic fallout of the COVID-19 pandemic. Thanks to capped and uncapped guarantees with Faktoro, Finora Kreditas, PayRay Bank, Orion Leasing and SEB Bankas, Lithuanian SMEs will be able to apply for loans with new, more advantageous, conditions.
Mindaugas Liutvinskas, Vice-Minister of Finance of the Republic of Lithuania, said: “Lithuania appreciates the efforts by the EIB Group in helping countries to cope with negative effects of the COVID-19 pandemic – on their economies as a whole, and businesses in particular. We see the EGF as additional to the measures the Government offered to the private sector to cope with the crisis. I am confident that the funds that will be made available to Lithuanian companies, in particular small and medium-sized enterprises, through the EIF guarantees will contribute substantially towards the sustainable development of the private sector and the broader economy.”
The Pan-European Guarantee Fund (EGF) was created by the European Investment Bank Group (EIB and EIF) and EU Member States as a Community response to the COVID-19 pandemic. It aims to increase access to credit for businesses in the wake of the economic effects of lockdowns and restrictions to contain the COVID-19 outbreak.
Thomas Östros, vice-president of the European Investment Bank Group, said: “Lithuania was not spared from the societal and economic effects of the COVID-19 pandemic. We are glad that the Ministry of Finance supported our proposal for a Pan-European Guarantee Fund that has been sustaining European businesses across the continent. Today’s signature vindicates that decision and makes sure that thanks to the EIF, Lithuanian companies will have access to the necessary funding to find their way out of the crisis.”
“The EGF was set up as an emergency measure, to help businesses affected by the pandemic. It allows banks to lend not only to the affected companies, but also to growing or young businesses, helping them to find their way out of the crisis. The support of Lithuania in making the EGF a reality, as well as its enthusiasm in making sure that these funds are channelled to the companies that need them, have been invaluable.” added Alain Godard, Chief Executive of the European Investment Fund.
More financing, better terms
Under the terms of the guarantees, each eligible loan included in the portfolios will be guaranteed at 70% of the credit amount. This significantly increases the likelihood of a positive loan decision and reduces the banks' risk, as in the event of a failure, the bank will be able to recover 70% of the potential loss thanks to the EGF. The financial intermediaries will independently manage and administer the loan portfolio, and the final decision to provide financing resides with them.
The total portfolio of new available financing guaranteed by these EIF transactions will amount to up to €364 million. The available individual loan amounts differ per intermediary, and can range from €10 000 to up to €6 million, depending on which bank the SMEs choose to do business with. For financing provided with EGF-backing, the credit terms are more favourable than borrowing without a guarantee. Loans may be used for investment projects, to build or acquire assets, and to finance the turnover of businesses.
Comments from the intermediaries
Faktoro will channel up to €24 million to local businesses. "Faktoro is delighted to complement our existing cooperation with EIF with this new guarantee agreement. SMEs in the Baltic states have a crucial role in the health and development of our economies. Our clients in Lithuania, Latvia, and Estonia have renewed their investment plans and are ready to grow. This agreement makes funding not only cheaper for the final recipients but also more available. I think this is a huge win for everybody: businesses, governments, the European Union and finally the European population, as additional funding often increases productivity," concludes Algirdas Gutauskas, CEO of Faktoro.
“Having taken advantage of this agreement, we expect to significantly improve our lending offering to our customers. They will benefit from the reduced cost of borrowing and softened requirements for asset pledges.” said Aurelijus Šveikauskas, CEO of UAB Finora kreditas, which will help to make available up to €30 million for Lithuanian SMEs. Finora kreditas believes that demand for convenient and flexible loans for SMEs continues to grow together with the Lithuanian economy. SME lending has been our focus from the start and in 2021 we increased our loan portfolio more than six times. With the EIF guarantee we can support hundreds of new customers with both secured and unsecured financing. Finora kreditas welcomes business customers from various types of segments who apply for financing.”
Orion signed an agreement for a guaranteed portfolio of up to €30 million with the EIF. "It is great that the EIF guarantee is available not only for banks, but also for specialised asset financing companies like us. It is evident in many cases that leasing products are preferred by businesses who are planning to invest in technological progress, innovation and green conversion, or updating their equipment. At Orion Leasing we are committed and focused to practically facilitate the technological progress of small and medium businesses in Lithuania.” – says founder & CEO of Orion Leasing Laimonas Belickas.
“Increasing competitiveness and efficiency remains the main element for SMEs in coping with negative pandemic effects that require flexible financing. It’s the second EGF guarantee transaction agreement for PayRay with EIF. Its importance is proven by the results of the first agreement. Since spring we have already financed 80 % of the assigned guaranteed portfolio and this amounts to €40,4 million. Today’s agreement opens more new possibilities for SMEs as the portfolio is increased to €280 million and the scope of financing tools is wider including loans, factoring and leasing. We have recently upgraded our products portfolio with leasing, so we are ready to fulfil all SMEs financing needs” said Paulius Jokšas, Board Member of PayRay Bank UAB, which with a total maximum portfolio volume of up to €280 million – including the part already signed in April this year – is set to support potentially hundreds of SMEs.
Finally, SEB Bankas is set to make available up to €50 million to local businesses under the new guarantee agreement with the EIF. “SEB Bank has an established position as the bank for entrepreneurs and business owners and has a solid customer portfolio which is based on long-term partnerships. The agreement with the EIF will ensure more effective financing for small and medium-sized enterprises, faster and sustainable Lithuanian economy recovery during the COVID-19 pandemic and strengthen our improvement in meeting a growing interest in sustainable finance among SMEs with a more attractive package. We believe that combined SEB Bank and EIF resources will provide new additional potential to finance more small and medium companies by contributing to the development of their projects, investing more in innovating their businesses with a strong emphasis on sustainability, particularly on reducing their CO2 footprint”, concludes Eglė Dovbyšienė, Head of Retail Banking at SEB bank in Lithuania.
Background information:
The European Investment Fund (EIF) is part of the European Investment Bank Group. Its central mission is to support Europe's micro, small and medium-sized businesses (SMEs) by helping them to access finance. The EIF designs and develops venture and growth capital, guarantees and microfinance instruments which specifically target this market segment. In this role, the EIF fosters EU objectives in support of innovation, research and development, entrepreneurship, growth, and employment.
The European Guarantee Fund (EGF) was set up by the EIB Group with contributions from Lithuania and other EU Member States to shield companies suffering from the COVID-19 crisis. Using nearly €25 billion in guarantees, the EGF allows the EIB and the EIF to quickly make loans, guarantees, asset-backed securities, equity and other financial instruments available to mostly small and medium-sized enterprises. The EGF is part of the European Union’s recovery package aiming to provide a total of €540 billion to boost those parts of the EU economy that have been hit the worst.
The European Investment Bank (EIB) is the long-term lending institution of the European Union owned by its Member States. It makes long-term finance available for sound investment in order to contribute towards EU policy goals. In 2020, the EIB stepped up its support for Lithuania by singing around €1 billion in financing for Lithuanian projects, with support going mainly to SMEs in the face of the COVID-pandemic, as well as the energy sector in the country.
