The European Investment Fund (EIF) and Noviti Finance, Lithuania’s alternative non-bank business financier, have signed a portfolio guarantee agreement under which almost €47 million will be lent on preferential terms to micro-businesses in Lithuania, Latvia, and Poland.
The EIF guarantee benefiting the microfinance business is provided under the European Union’s InvestEU programme. It is expected that around 2 640 microloans will be signed under this programme and micro-enterprises with up to ten employees and annual revenues of up to €2 million will be able to borrow up to €50 000. Businesses will not be asked to pledge any assets, and, in some cases, loans will even be granted without any collateral. Loans will be granted for both investment and working capital purposes.
European Commission Executive Vice-President for an Economy that Works for People Valdis Dombrovskis said: “InvestEU plays a crucial role in helping small EU businesses get the financing they need to grow, innovate and create jobs. Thanks to today’s new InvestEU agreement, micro-businesses in Lithuania, Latvia and Poland will benefit from loans that are tailored to their needs. This will enable them to overcome the obstacles they face in accessing finance so that they can reach their full potential.”
“This new agreement with Noviti Finance, backed by the InvestEU programme, will support micro-businesses that struggle with traditional lending and are faced with different financial pressures today. We are especially proud that besides going to Lithuania and Latvia, part of the lending will be channelled to the Polish market which is currently underserved in terms of financing to small businesses and micro-enterprises,” said EIF Chief Executive Marjut Falkstedt.
CEO of Noviti Finance Linas Armalys welcomed the fact that the new guarantee will open up the possibility for even more companies to obtain finance on more favourable terms. “Micro-enterprises with up to ten employees account for 84% of all small businesses operating in Lithuania. However, they are the ones that have most difficulty accessing finance. Small businesses have much smaller needs and often have no tangible assets to pledge. The situation is similar in neighbouring countries such as Latvia and Poland. In all three countries, this programme will make a significant contribution to the availability of finance for small businesses.”
The importance of the latest agreement with the EIF is confirmed by the results of Noviti Finance over the last few years. Under two previous agreements with the EIF, Noviti Finance disbursed loans to micro-enterprises in a much shorter timeframe than anticipated. The first EIF guarantee of €10 million in 2020 was deployed within 16 months. Last year’s guarantee of €12.5 million in loans was disbursed even faster — within a year. As many as 1 305 companies received concessional finance under this agreement.
“The last few years have been difficult for business, but it is encouraging that companies are adapting quickly to the changing environment and are actively applying to us for financing,” adds Armalys.
At the beginning of 2023, Noviti Finance also started providing business loans in Poland, where it plans to finance more than 200 small businesses and distribute €3 million in loans this year.
The company estimates that in Lithuania last year, small and medium-sized businesses borrowed, on average, for 27 months and the average loan amount issued was around €16 000. In Lithuania, 75% of all loans granted by Noviti Finance were guaranteed by the EIF. In Latvia, the percentage was even higher at 91%.
About Noviti Finance
Noviti Finance has been operating on the market since 2016. During this period, the company has financed more than 3 500 companies in the Baltic States, where Noviti Finance actively contributes to the promotion of small businesses. In Lithuania, Noviti Finance is an official partner of Invega and also lends to small businesses through the EIF’s InvestEU programme. During the COVID-19 pandemic, Noviti Finance actively implemented state support measures for businesses and was the second largest financier in terms of “Loans to businesses most affected by COVID-19”.
About the EIF
The EIF is part of the European Investment Bank Group. It supports Europe’s small businesses by improving their access to finance through a wide range of selected financial intermediaries, such as banks, guarantee and leasing companies, micro-credit providers and private equity funds. The EIF designs and offers equity and debt financing instruments fostering EU objectives in support of entrepreneurship, growth, innovation, research and development, the green and digital transitions and employment.
The InvestEU programme provides the European Union with crucial long-term financing by mobilising significant public and private funds to support a sustainable recovery. It helps generate additional investments in line with key European priorities, such as the European Green Deal, the digital transition and support for small businesses. The InvestEU programme brings together a multitude of EU financial tools and has three components: the InvestEU Fund, the InvestEU Advisory Hub and the InvestEU Portal. The InvestEU Fund is implemented via various financial partners. They will invest in projects by using an EU budget guarantee of €26.2 billion to mobilise at least €372 billion in additional investments.