November 9, 2020
Financial technology company SME Finance, the largest non-bank finance company in the Baltics, has received a record € 80 million in funding from the European Investment Bank (EIB) to strengthen small and medium-sized businesses in the Baltics through corporate invoicing. This is the first EIB financing of its kind to fintech in history.
The EIB financing received by SME Finance in the amount of 80 million euros will be used for lending or factoring of invoices of small and medium-sized Lithuanian, Latvian and Estonian companies. “This is a great benefit for small and medium-sized businesses, as these investments will make it even more active and cheaper to meet the growing demand for working capital financing in the Baltics. The growing demand for factoring services in the market is “The best possible preparation for the second wave, while the availability of bank loans has significantly decreased. It is Lithuanian, Latvian and Estonian companies that have seen the largest decrease in the availability of bank loans in the European Union,” said Mindaugas Mikalajūnas, Head of SME Finance.
Funding for entrepreneurs will be available in the first half of 2021
The first tranche of EIB financing will be available to entrepreneurs in the first half of 2021. SME Finance plans to offer business financing with an annual deposit interest rate of 4-8%, while the maximum factoring limit provided to the client will be up to 5 million euros.
70% or 56 million euros of the allocated funding will be dedicated to factoring services for the small business segment, while 30% or 24 million euros will be allocated to support medium-sized businesses. More than half or about 60% of the allocated EIB financing will be directed to Lithuanian business, but the share of Latvian and Estonian companies in the total factoring services portfolio will be 20% for each country. The EIB loan will finance the transport, retail and wholesale, manufacturing, services and other sectors.
Mindaug Mikalajūns, Head of SME Finance, emphasizes that a successful partnership with the EIB is a significant benefit not only for the company itself, but also for the entire Lithuanian fintech sector. Lithuania’s image as a fintech center will be strengthened more internationally, and at the same time these partnerships will serve as an incentive for the company to enter the Estonian market in a more targeted manner. M. Mikalajūns continues: “For institutional investors looking for opportunities to participate in the development of small and medium business in the Baltic States, our financial technology platform provides several significant benefits.” SME Finance “currently operates in Latvia and Lithuania, but we expect to start operations in Estonia and Poland soon. In turn, thanks to technological development and availability, we can distribute funding efficiently to a large number of small and medium-sized enterprises. ”
SME Finance currently has € 80 million in financial resources, of which € 10 million comes from the Invega credit line, under the Alternative financial instrument, € 16 million has been raised through private bond issues, and a further € 5 million has been raised through private bond issues. million euros consists of share capital. Citadele Bank has granted the company an initial loan of EUR 10 million, with the possibility of increasing it to EUR 15 million, while EUR 35 million has been lent by international institutional investors from Great Britain and South Korea.
56% of SME Finance’s turnover is business loans, 42.2% – factoring products, 1.8% – leasing. The largest share of the company’s customers consists of trade companies (35.2%), as well as manufacturing (23.1%), service (19.5%) and logistics (13.7%) companies. It is planned that the loan portfolio managed by SME Finance will reach 50 million euros by the end of 2020, but in the next 2021 it will be able to provide financing in the amount of 600 million euros to the companies of the Baltic States and Poland. The SME Finance branch has been operating in Latvia since July 2019.
The decision to provide EIB financing of EUR 80 million to SME Finance was approved on 15 July 2020 at a meeting of the European Commission. In total, the preparation and coordination of the project took almost two years.
About “SME Finance”
SME Finance is a fintech company founded in 2016 with the aim of addressing the lack of working capital financing for small and medium-sized enterprises (SMEs). Since its inception, the company has financed invoices worth more than 459 million euros, provided financial services to 500 customers and attracted more than 114 million euros from local and international investors. The company has partnerships with the world’s leading providers of trade-related insurance solutions, including Euler Hermes and Coface. SME Finance is headquartered in Vilnius, Lithuania.
About the European Investment Bank
The European Investment Bank contributes to the objectives of the European Union by providing long-term project financing, guarantees and advice. The EIB supports projects both inside and outside the EU. The EIB’s shareholders are all EU countries, but their boards of directors are made up of their finance ministers. In terms of lending volumes, the EIB is the largest multilateral financial institution in the world.
