The Lithuanian Ministry of Finance and the European Investment Fund (EIF) have announced substantial new support for Lithuanian SMEs in the context of the Pan-European Guarantee Fund (EGF).
Guarantee agreements with five Lithuanian financial intermediaries will make available up to an additional €364 million in new financing for businesses dealing with the economic fallout of the COVID-19 pandemic.
Due to capped and uncapped guarantees with Faktoro, Finora Kreditas, PayRay Bank, Orion Leasing and SEB Bankas, Lithuanian SMEs will be able to apply for loans with new, more advantageous, conditions.
Mindaugas Liutvinskas, Vice-Minister of Finance of the Republic of Lithuania, said: “Lithuania appreciates the efforts by the EIB Group in helping countries to cope with negative effects of the COVID-19 pandemic – on their economies as a whole, and businesses in particular. We see the EGF as additional to the measures our Government offered to the private sector to cope with the crisis. I am confident that the funds that will be made available to Lithuanian companies, in particular small and medium-sized enterprises, through the EIF guarantees will contribute substantially towards the sustainable development of the private sector and the broader economy.”
The Pan-European Guarantee Fund (EGF) was created by the European Investment Bank Group (EIB and EIF) and EU Member States as a Community response to the COVID-19 pandemic. It aims to increase access to credit for businesses in the wake of the economic effects of lockdowns and restrictions to contain the COVID-19 outbreak.
Thomas Östros, vice-president of the European Investment Bank Group, said: “Lithuania was not spared from the societal and economic effects of the COVID-19 pandemic. We are glad that the Ministry of Finance supported our proposal for a Pan-European Guarantee Fund that has been sustaining European businesses across the continent. Today’s signature vindicates that decision and makes sure that thanks to the EIF, Lithuanian companies will have access to the necessary funding to find their way out of the crisis.”
Alain Godard, Chief Executive of the European Investment Fund, stated: “The EGF was set up as an emergency measure, to help businesses affected by the pandemic. It allows banks to lend not only to the affected companies, but also to growing or young businesses, helping them to find their way out of the crisis. The support of Lithuania in making the EGF a reality, as well as its enthusiasm in making sure that these funds are channelled to the companies that need them, have been invaluable.”
More financing, better terms
Under the terms of the guarantees, each eligible loan included in the portfolios will be guaranteed at 70% of the credit amount.
This significantly increases the likelihood of a positive loan decision and reduces the banks’ risk, as in the event of a failure, the bank will be able to recover 70% of the potential loss thanks to the EGF.
The financial intermediaries will independently manage and administer the loan portfolio, and the final decision to provide financing resides with them.
The total portfolio of new available financing guaranteed by these EIF transactions will amount to up to €364 million. The available individual loan amounts differ per intermediary, and can range from €10 000 to up to €6 million, depending on which bank the SMEs choose to do business with.
For financing provided with EGF-backing, the credit terms are more favourable than borrowing without a guarantee.
Loans may be used for investment projects, to build or acquire assets, and to finance the turnover of businesses.