Banking analysts say the negative impact of the Russian-Ukrainian conflict on Latvian enterprises has been smaller than expected lately. Support from EU structure funds is mentioned as one of the most important business development tools in Latvia.
«Banks are competing with one another for the right to provide business loans to healthy companies. Enterprises that have their own capital are capable of upholding their commitments. They have their own business plans and transparent money flow. Banks offer very favourable conditions to them. Loan requirements in Latvia are much more favourable than those in places like Scandinavia. Unfortunately, Latvian companies’ ability to take loans is currently lower than necessary for rapid development of the national economy. If the country manages to effectively use its funding from the EU structure fund next year, lending volumes may continue growing in Latvia,» – says President of Latvian Commercial Banks Association Martins Bicevskis.
Criteria for loan issue should be high. Banks have the resources and the interest to provide more loans. However, companies are not prepared to receive loans. Even those that appear qualified for investments are not always ready to fulfil their commitments and pay back loans. Latvia still has a large number of enterprises that have problems with paying back loans. In spite of the fact that the volume of unpaid loans has been declining in recent years, the share of overdue loans for more than 90 days was 4.85% this year. Both sides end up in a difficult position because of this tendency.
«We have noticed a rise in lending in the transport and storage sector following a period of lacking activity. It is too soon to consider further development of the sector and potential lending volumes – there are certain political decisions that have to be made. Progress in Latvia’s processing industry has been unstable in the first ten months of 2015 – from moderate growth at the beginning of the year (because of restoration of work of Liepājas metalurgs) to a decline in the second half of the year. Next year promises to be full of challenges. However, the growth of procurement managers index and the index of export orders points to moderately positive possibilities,» – comments Karlis Danevics, co-Chairman of Latvian Commercial Banks Association’s Lending Committee.
Entrepreneurs should pick the financing options that fit their development strategy. Banking loans will soon become the most appropriate solution for experienced entrepreneurs. Alternative funding will be the best option for emerging businessmen. «For example, in order to find funding to build the first factory, enterprises should turn for help to venture capital funds, business angels or the newest forms of funding – crowdfunding, mutual loan platforms and others. To receive funding for the construction of the second factory, it would be best to turn to a bank,» – adds K.Danevics.
«ALTUM adds to the capabilities of the private market, focusing on enterprises that are in their early development and growth stage. The government and ALTUM provide assistance to perspective companies that do not strictly fall in the category of receiving assistance from the private market. Over the past two years, ALTUM has provided financial assistance to 4,300 projects worth EUR 220 million. Finances of the new EU structure fund planning period will become available next year. This means new loan programmes and new venture capital funds,» – notes Jekabs Krievins, ALTUM board member.