Credit guarantees and administration of financial engineering instruments with the support of the structural funds – this is the future of small and medium enterprise promotion. Precisely this conclusion was reached by the majority of the participants and the speakers at the conference „Financial Instruments for Small and Medium Enterprises: Status Quo and Perspectives“, that in the end of Novemver was organised by UAB „Investicijų ir verslo garantijos“ (INVEGA) for its partners and European guests.
„The implementation of financial engineering instruments compliments the benefits of guarantees provided by INVEGA and gains greater importance. SME financing promotion measures do not distort competitive environment, but support it, providing opportunities to access the so necessary finance for a bigger number of small and medium business entities, – says the Director General of INVEGA Audrius Zabotka. The conference has once again confirmed that the provision of credit guarantees and the implementation of financial engineering instruments in combination are new and firm steps in the history of small business support and financing promotion. This is the road to follow in order to contribute to strengthening the SME sector that will be competitive and create added value“.
In the conference presentations were given by the European and Lithuanian experts of the area: Mr. José Fernando Figueiredo, President of the European Association of Mutual Guarantee Societies (AECM), Mr. Dieter Fleischer, representative of Bürgschaftsbank Baden-Württenberg GmbH, Mr. Kęstutis Juras, representative of European Commission, Directorate General for Economic and Financial Affairs, President of the Association of Lithuanian banks Mr. Stasys Kropas, Harro Pitkänen, Senior Director and Deputy Head of Lending Group at Nordic Investment Bank, Mr. Audrius Zabotka, INVEGA Director General, Mrs. Inga Miliauskienė, Head of the Financial Instruments Division of EU Assistance Coordination Department of the Ministry of Economy, Mrs. Nijolė Mackevičienė, Director of the EU Structural Support Department of the Ministry of Social Security and Labour, and Mr. Šarūnas Šiugžda, President of Lithuanian Private Equity and Venture Capital Association. The conference was opened by Zita Gurauskienė, the long-time head and a member of the Board of INVEGA, and the results of the conference were summarised by Daumantas Lapinskas, chairman of the Board of INVEGA and Vice-minister of Economy.
During the first six months, UAB Investicijų ir verslo garantijos (INVEGA) provided credit institutions with 292 guarantees (for the total amount of LTL 90.4 million) for loans issued to small and medium-sized business entities (hereinafter referred to as SMEs), and the amount of guaranteed loans totalled LTL 62.4 million. During the first half of the year, business support in the form of guarantees was mostly needed by micro-enterprises. Loans taken bys such enterprises accounted for 53.08% of all guarantees issued by INVEGA.
“The provision of guarantees is one of the activities carried out by INVEGA to facilitate access to financing sources for Lithuanian enterprises that implement investment projects or borrow working capital, and to ensure the competitiveness of such enterprises in foreign markets,” says Audrius Zabotka, Director General of INVEGA.
35.27% of the guarantees were provided for loans taken by enterprises active in construction, food industry, products of wood and other manufacturing. Guarantees provided to manufacturing enterprises accounted for the largest share of all guarantees. They were closely followed by loan guarantees issued to commercial enterprises, which amounted to 30.82%, and service companies, which totalled 29.79%.
During the first six months, enterprises operating for more than 5 years were the most active in borrowing secured with INVEGA guarantees; guarantees provided to such enterprises accounted for 54.79% of all guarantees; 23.63% guarantees were issued to new enterprises operating for less than one year.
According to Audrius Zabotka, the first six months of this year showed more investment projects being implemented by business enterprises that had INVEGA guarantees. Guarantees provided for investment loans amounted to 57.88%, while loans for working capital – 42.12%.
During the first six months, entrepreneurs from Kaunas, Vilnius and Šiauliai as well as Alytus County were the most active in taking INVEGA-guaranteed loans from credit institutions. SMEs from Telšiai County were the most passive in using the state aid provided in the form of guarantees.
From the commencement of its operations (in 2001) to 30 June 2012, INVEGA has already provided credit institutions with 3,730 guarantees for loans taken by SMEs; the total amount of guaranteed loans reached LTL 1,465.52 million, while the amount of guarantees issued in respect of such loans totalled LTL 988.52 million.
Audrius Zabotka, acting Director General of UAB Investicijų ir verslo garantijos (INVEGA), has been appointed the Director General of INVEGA. The Board of Invega has chosen Audrius Zabotka from three candidates to this office.
Audrius Zabotka has been employed by INVEGA for 10 years and has more than 15 years or managerial experience. He has bachelor’s degree in economics and master’s degree in business administration and management from Vilnius University.
From the very incorporation to 1 February 2012, INVEGA has been led by Zita Gurauskienė.
During the first five months of this year, the Entrepreneurship Promotion Fund (EPF) under the administration of UAB Investicijų ir verslo garantijos (INVEGA) issued 93 soft loans for the total of LTL 5.3 million. The comparison with the same period of the last year shows an increased borrowing activity, viz. 31% more loans were granted for the amount that is 23% higher than during the first half of 2011. In comparison with the second half of the last year, the growth is even higher: 50% more loans and 43% higher amount. Almost LTL 278,000 in loan interest have been reimbursed during the entire period of application of this facility.
“The increased unemployment forced to look for methods of how to provide opportunities and financial incentives for the creation of jobs and the promotion of entrepreneurship and self-employment. It is for this reason that the Entrepreneurship Promotion facility has been developed in order to provide more favourable conditions for micro and small enterprises and natural persons to start their business,” said Alvydas Puodžiukas, the Chancellor of the Ministry of Social Security and Labour, which is one of the founders of the EPF.
EPF grants soft loans up to LTL 86,000. The average amount of loans granted during the first six months of this year amounted to LTL 60,000. Such loans are usually taken for investment projects, which amount to 75% of all loans.
“The most active borrowers from the EPF are retail and wholesale, public catering, beauty services, short-term lease of vehicles, leisure organisation and advertising companies. 35% were granted to young people under 29 years of age, 8% – to residents older than 50 years of age, and 6% – to unemployed people. These population groups have the priority when distributing the EPF aid,” said Jūratė Tamošaitytė, Head of the EU Project Division of the Lithuanian Central Credit Union.
You would not believe how many well-known interesting businesses or businesses that are currently rapidly gaining popularity in Vilnius have started with the business support provided by INVEGA. For instance, the proprietors of the exceptionally French Notre Vie wine-cellar are proud of their short, yet impressive list of selected wines and the already formed circle of regular clients.
“We have been nurturing an idea to open a high-quality wine shop in the capital city for a very long time. The Entrepreneurship Promotion facility offered by INVEGA has given us an opportunity to make our dreams come true. We took a two-year loan of 65,000 with the interest of 7.5%, which is partially reimbursed by INVEGA. We invested the borrowed funds into the bar and shop equipment, and used them as the required working capital. Today, we can be proud of our uniqueness – we can offer products to our clients that are new to them and than are not associated with mass consumption,” says Marius Linikas, Director of Notre vie wine-cellar.
Besides soft loans, INVEGA offers other services to those who finance their business with EPF funds, viz. a guarantee of up to 80% of the loan amount and the reimbursement of 95% of interest from loans. According to Audrius Zabotka, acting Director General of INVEGA, the offered reimbursement of interest was used by almost everybody who got loans from the EPF. 70% of loans have been granted with INVEGA guarantee.
In 2012, the ceiling of liabilities of UAB Investicijų ir verslo garantijos (INVEGA) under guarantee contracts should not exceed the total of LTL 550 million. It is a decision taken by the Government of the Republic of Lithuania.
“According to the data of the last year, INVEGA provides more guarantees for working capital loans the duration of which is not long, and such loans are repaid more quickly. This is also reflected by the joint guarantees portfolio,” says Audrius Zabotka, acting Director General of INVEGA. “Furthermore, in 2012, INVEGA will no longer guarantee loans for the modernisation of multiple dwelling buildings; therefore, guarantee liabilities are expected to be lower than last year.”
This year the established ceiling for INVEGA liabilities was LTL 123 million lower than in 2011. In 2011, 620 guarantees were provided for the aggregate amount of LTL 177.3 million. On 31 December 2011, the balance of liabilities totalled LTL 386.1 million. In 2012, 135 guarantees were provided for loans taken by small and medium-sized businesses for the aggregate amount of LTL 31.4 million, and one export-credit guarantee was issued for the amount of LTL 110,489.60 (the total of 136 guarantees were provided in 2012, and the aggregate amount of such guarantees reached LTL 31,476,595.10).
For businesses to sustain and develop their presence in the existing export markets, the State and private insurance companies shall continue to share the risks of the default of buyer’s obligations. It will help exporters, because the growing rate of the failure to pay for supplies in foreign markets has caused private insurers to decrease insurance limits in order to accommodate the risk.
UAB Investicijų ir verslo garantijos (INVEGA) shall provide guarantees until 31 December 2012; the amount of the guarantee shall depend upon the reduced and/or insufficient limit of the granted buyer’s credit, while the insurance risk period shall be less than two years. Moreover, the policyholder (exporter) shall assume at least 20% of the risk of the buyer’s debt.
INVEGA will provide state guarantees to export-credit policyholders (exporters) who have concluded export-credit insurance contracts with export-credit insurance companies that have been awarded an investment credit rating and concluded an administration agreement with INVEGA. An opportunity to continue providing state guarantees to exporters emerged when the new Law on Special State Guarantees on Export-Credit Insurance came into force in 2011 and when the European Commission passed a new decision on the Lithuanian short-term export-credit insurance scheme.
INVEGA, which provides special state guarantees to Lithuanian exporters, has signed contracts with two international insurance companies, viz. Atradius Credit Insurance (Atradius) and Coface Austria Kreditversicherung AG (Lithuanian branch office). Therefore, if the said insurance companies reduce or refuse to grant the desired buyer’s credit limit, Lithuanian exporters who have or intend to have insurance with these insurance companies may request that the said insurance companies contact INVEGA regarding the provision of INVEGA guarantee.
According to Atradius Country Director for Sweden and Baltic States Magnus Lindgren, Atradius Credit Insurance is happy to continue cooperation with INVEGA regarding the provision of special state guarantees.
Magnus Lindgren informed that Atradius started its operations in the Lithuanian credit insurance market as early as 1999; he noted that Atradius believes that the continuation of cooperation with INVEGA will accelerate the Lithuanian export development, while the provision of special guarantees will grant the protection from risks arising from export transactions, which is especially important for the economic development in Lithuania, especially in the current financial and economic crisis.
Business risk management company Coface Lithuania continuously follows the changing business environment and risks generated by such environment, and it records the ever-growing late-payment trend not only in euro-area Member States facing economic problems but also in other markets of importance for Lithuanian exporters.
“In 2011, the number of payment failures in the euro area grew up by 28%, and we understood that we were unable to assume new risks in certain countries and to provide the desired credit limits to our policyholders. Therefore, in order to find a solution together with our clients and to try to have the minimum influence on the existing sales of the undertakings, we had to secure measures allowing undertakings to preserve their market position and export volumes. One of the measures that we found to be the best suited was the short-term export-credit insurance aid granted by the Lithuanian state,” said Mantvydas Štareika, Director of Marketing and Sales Department at Coface Lithuania.
The Ministry of Economy hopes that special state guarantees provided for export-credit insurance will help reduce the risks associated with export transactions and increase national export volumes.
Information of the Ministry of Economy
Representatives of the small and medium-sized enterprises (SME) henceforth will be able to get a business loan with UAB „Investicijų ir verslo garantijos“ (INVEGA) guarantee in the BIGBANK bank. In order to create the most favorable conditions for small and medium-sized business development INVEGA and the branch of BIGBANK AS signed a cooperation agreement for the provision of guarantees for the loans taken by SME entities.
„The fact that more and more credit institutions expressed their willingness to work with INVEGA, not only enhances the overall role of INVEGA as the guarantee institution on the business market, but also offers more options for small and medium-sized businesses, wishing to expand or start their business, but facing the money problem“, – says Zita Gurauskienė, INVEGA Director-general.
Loans with up to 80 percent of state guarantee will be provided for implementation of investment projects or for supplement of working capital needed for business development. Guaranteed loans will be available to the companies with less than 250 employees.
„The benefit of the business credit with INVEGA guarantee for small and medium-size business – obvious. SME companies requesting the loan from the bank often face a security problem. Credit with INVEGA guarantee will help to solve that problem. In addition, with INVEGA guarantee the part of interest of SME entities can be funded, “– says Rolandas Norvilas, Head of BIGBANK AS branch.
The maximum guarantee amount cannot exceed 5 million LTL. SME entities, who received BIGBANK loan with INVEGA guarantee, can get the refund of interest paid on loan up to 50 percent, but not more than 5 percent of annual interest.
UAB „Investicijų ir verslo garantijos“(INVEGA) – the guarantee institution founded by the Government of the Republic of Lithuania in 2001 m. and supervised by the Ministry of Economy, which, aside from the provision of loans for the small and medium-sized enterprises, administers the partial compensation of loan interest and the provision of preferential loans financed from the EU Structural Funds and Lithuanian Budget. From the inception (year 2001) until 31st May 2011 INVEGA has already provided 3 094 guarantees for credit institutions for the loans taken by SME entities, total amount of guaranteed loans is close to 1 248,1 million LTL, and the amount of guarantees provided for these loans – 837,5 million LTL.
BIGBANK AS – one of the largest banks in the Baltic countries, specializing in the market of consumer credits and fixed-term deposits for natural persons, as well as SME-type enterprises leasing. BIGBANK group has 30 customer service offices in the Baltic countries, Finland and Spain. BIGBANK offers term deposits in Germany and Austria as cross-border service.
LitCapital venture capital fund invests in the company UAB „Putokšnis“. The core activity of the company – production of PET packaging in Lithuania and Ukraine. Last year the company’s turnover exceeded 110 million LTL. This investment will allow the company to exploit its production capacity to the maximum. What is more, it is intended to expand production capacity and additionally invest in cogeneration plant for the technological needs of UAB „Putokšnis“.
„We are glad having invested in UAB „Putokšnis“– one of the most advanced industrial companies in Lithuania. Mr. A. Stulpinas managed to create a wonderful, dynamic company that continually seeks to improve technology and is able to adapt quickly to customer’s needs. This is a serious competitive advantage. The last couple of years were difficult for the company, however now we can observe a new business phase, when we will try to use all the good features of the company and employee team. The future of plastic packaging is very promising. Global demand for PET packaging is growing at 6-7 % annually. The range of PET packaging is constantly expanding and at the same time the package becomes acceptable to an increasing range of new products. In addition, PET packaging is completely recyclable and according to recycle rates by far surpasses all other types of packaging. That means it is the “greenest” package, the quality that is very important for our fund, because we aim to invest in environmentally friendly products and technologies,“ – according to Šarūnas Šiugždas, LitCapital fund founder and managing partner.
A. Stulpinas: „The company is glad having received such assessment from LitCapital fund and having managed to attract funds under JEREMIE program. This investment will enable the company to take a step yet this season to increase sales cooperating with existing and potential customers, as well as creating new products, increasing production capacity. Together we hope to achieve the best results in the future. “
Graham Cope, European Investment Fund Region manager: “This latest investment of LitCapital reaffirms the importance of capital investment in Lithuania, and this is done with the support of JEREMIE supervisory fund managed by European Investment Fund. In addition, it also shows that growing companies can attract private capital and thus be able to take advantage of og the improving economic environment.”
Vice Minister of Economy, Daumantas Lapinskas: „Congratulations to LitCapital with another investment, permitting to suggest, that investing activity of state supported venture capital funds is accelerating. It is also important to mention an effective and coordinated activity of LitCapital, bank Ūkio bankas and INVEGA and the Ministry of Economy, which resulted in the combination of investment, loan and guarantee allowing this company to gain new inspiration and firmly continue the development.“
LitCapital is a venture capital fund, founded in 2010 in cooperation with European Investment Fund. LitCapital currently manages 20 million euro size and invests in small and medium-sized (private) companies in Lithuania. The investments are long-term investments in the share capital of private enterprises and seek to create growth and development. Size of one investment – from 2 to 10.4 million litas. Duration of investment – 4-6 years. Later a strategic investor is being searched for such a private enterprise, who purchases the shares of the fund.
UAB „Putokšnis“– leading manufacturer of PET packaging in the Baltic States and Scandinavian region. The company produces up to 40 thousand tons of PET packaging production. 90% of UAB „Putokšnis“ production is being exported to beverage manufacturers to such markets as Germany, Poland, Scandinavian countries etc.
About JEREMIE program. JEREMIE is a financial instrument, a joint initiative of the European Commission (Directorate General for Regional Policy (DG Regio), the European Investment Bank (EIB) and the European Investment Fund (EIF) aimed at increasing opportunities of very small, small and medium-sized companies of EU region to receive the finance. It is aimed to designate a certain amount of funds from regional funds for venture capital and thus to encourage the innovation, as well as to help business grow.
Ministry of Economy information
Project „Promoting Entrepreneurship“, giving people the opportunity to start their own business, is being implemented by 57 credit unions operating in Lithuania. The project encourages to take part in different entrepreneurship trainings for free and to acquire the fundamental knowledge necessary to establish own business and to get a loan for the start from established for this purpose Entrepreneurship Promotion Fund (EPF).
People from Vilnius (43 percent), Kaunas (17 percent.) and Klaipeda (10 percent) continue to maintain the leading position in the general scale of trained citizens. From all priority groups envisaged by the project the leading position belongs to young people under 29 years, who compose 43 percent of all people who have completed the trainings. Training providers have recently focused on advising potential borrowers on a business idea, business plan or other relevant issues related to obtaining a loan.
According to data of Lithuanian Central Credit Union (LCCU), in the second half of May this year 3,3 thousand people have participated in at least one business basics trainings or consultations. The total amount of the 69 loans granted by Entrepreneurship Promotion Fund reached more than 3,7 million LTL in the second half of May. The total amount of granted business loans including credit unions funds (10 percent) reached 4,1 million LTL.
Most loans under the project “Promoting Entrepreneurship” were granted by credit union „Vilniaus taupomoji kasa“ – 11, Kaunas credit union – 10 , Akademic credit union (Kaunas) – 9, Officer credit union (Vilnius), „Mėmelio taupomoji kasa“ (Klaipėda) – 4. Preferential business loans were granted as well by other credit unions operatins in different Lithuanian cities: „Jonavos žemė“, „Savas rūpestis“ (Šiauliai), „Vievio taupa“, „Moterų taupa“ (Kaunas), „Giminėlė“ (Kaunas), Skuodo bankelis, Raseinių, Vilniaus district, Kretinga, Kėdainiai district, Kaunas archdiocese, Jūreiviai, Grigiškės, Palanga and other credit unions. Above mentioned credit unions granted 1 – 3 business loans each.
On 30 December 2009 the Ministry of Social Security and Labour (MSSL), Ministry of Finance (MF) and UAB “Investicijų ir verslo garantijos” (INVEGA) signed the trilateral Agreement on the Establishment of the Entrepreneurship Promotion Fund. Loans from EPF are granted by 57 Lithuanian credit unions, the members of LCCU. The funds for Entrepreneurship Promotion Fund are received from administered by MSSL Human Resources Development program engineering instrument “Promoting Entrepreneurship”. It is funded by the European Social Fund.
If you have a business idea and a lack of knowledge and money to implement it, contact your local credit union according to your residence, work or business place. For a further information you can also contact us on free phone 8 800 11 211 or search online www.lku.lt.
General Entrepreneurship Promotion Fund loan granting conditions:
Loans are granted to small and very small companies, operating less than one year, social enterprises and natural persons wishing to start or to develop their business.
Loans can be designated to finance investments and working capital.
The maximum loan amount – 86 thousand LTL.
Loan interest rates are currently 5,49 percent (interest rate can vary from 5,49 percent to 9,49 percent, depending on the current variable VILIBOR interest part).
Final deadline of loan repayment – 31st December 2015.
Loan appliance and repayment period, as well as schedule, guarantee instruments and other loan granting conditions are determined by the borrower and credit union by mutual agreement, by signing a loan agreement.
Up to 80 percent of loan amount can be assured of INVEGA guarantee.
50 percent of interest paid will be refunded for the entrepreneur or company who has received the loan and INVEGA guarantee.
Lithuanian Central Credit Union Information