SMEs to get new credit line

  • 2010-04-01
  • From wire reports

RIGA - The European Investment Fund (EIF) signed agreements with SEB bank and Swedbank on March 26 under which these banks will provide loans worth a total of 73 million lats (104.2 million euros) for small and medium sized businesses in Latvia, reports SEB will provide loans worth 60 million euros, and Swedbank will provide loans worth 44 million euros.
The banks will manage the newly created funded risk sharing product under the Jeremie Holding Fund (JHF) initiative, designed to stimulate lending from banks to small and medium sized businesses over the next two year period.

The EIF, from structural fund and state budget co-financed JHF resources, will provide 30 million euros to SEB and 22 million euros to Swedbank, which will be matched by an equal amount from the banks, therefore totaling 104 million euros. These transactions enable both banks to accelerate lending to Latvian small and medium sized businesses during the current economic recession.

“This funded risk sharing instrument has been newly designed and developed by the EIF, providing funding and sharing credit risk with banks, thus improving access to financing for small and medium sized businesses. The EIF is managing this product in several EU member states for the benefit of local small and medium sized businesses, and Latvia is one of the first to benefit from it,” said Hubert Cottogni, head of regional business development for the European Investment Fund.

SEB board member Kaspars Delins admitted that the bank highly values the possibility to support well considered and sustainable projects. He says that the proportion of small and medium sized businesses in the overall business environment in Latvia consists of about 98 percent of total companies, thus allocation of funding to this group of enterprises ensures functioning of the overall national business environment.

“More and more of these companies, despite the challenging business environment, have been able not only to adapt to the current market situation, but even to develop their operation attracting also bank funding,” Delins noted.
In his view, the agreement with the European Investment Fund for financing Latvian small and medium sized businesses is a “confirmation of purpose of SEB to promote the recovery of the business environment in Latvia and funding different business ideas.”

Also, Swedbank board member Daniils Rulovs admitted that the terms of the program are in line with Swedbank’s general principles of lending. “Swedbank signed up to be a part of this program based on the conviction that one should always look one step ahead,” said Rulovs, adding that the terms are designed for companies with a solid financial standing - the bank’s customers, small and medium sized enterprises mainly working in the manufacturing industry and are export-oriented.
“We aim to provide finance for profitable corporate clients with long-term viability that form the basis for recovery of the Latvian economy,” Rulovs said.

The funded risk sharing instrument is structured to combine capital from the JHF with capital provided from the bank, on an equal basis, as well as to share the risk proportionally. Lending to small and medium sized businesses will be managed by the banks under normal market terms and conditions.

The EIF is also implementing a number of other financial engineering instruments using the JHF structure in Latvia, with a venture capital fund managed by BaltCap Management Latvia that is already operational and accessible to small and medium sized businesses looking for investments, and a seed/start-up fund managed by Imprimatur Capital Baltics expected operational in May.