Non-banking sector increasingly important in financing small businesses

In order to stimulate small business financing in the Baltic States, non-bank business lender Noviti Finance and the European Investment Fund (EIF) have signed a cooperation agreement to give micro businesses and farmers better access to funding of up to 25,000 euros. The guarantee is funded by the European Union’s Employment and Social Innovation (EaSI) programme and is backed by the Investment Plan for Europe.

Noviti Finance, a non-bank lender based in Lithuania, will use the guarantee instrument to support micro companies in all three Baltic States (Latvia, Lithuania and Estonia). The Investment Plan for Europe allows the European Investment Bank Group to invest in more and often higher-risk operations, while EaSI aims to improve access to finance for vulnerable groups, micro-enterprises and social enterprises.

“The agreement with the EIF means that, from now on, funding will be available to even more small businesses, on more favourable terms, with lower interest rates and in most of cases without collateral or personal sureties. Small businesses will be able to use the financing as working capital, or for business development, thus effectively helping to grow and manage risks due to EIF-EaSI guarantee,” said Linas Armalys, director of Noviti Finance.

Noviti Finance is an alternative lender for small and medium-sized companies that has successfully operated in Lithuania for four years. The company has funded over 1,000 companies since its establishment in 2016.

“Promoting an economy that works for the people means encouraging the ambitions and entrepreneurial talents our citizens. This agreement is an excellent step in that direction. This financial boost gives micro-enterprises in Latvia, Lithuania and Estonia a real opportunity to thrive and expand,” addedEuropean Commission Executive Vice-President Valdis Dombrovskis.

Alain Godard, the chief executive of the EIF, believes that fintech and non-bank financing are playing an increasingly important role in giving micro- and small enterprises access to finance.

“We are very happy to support Noviti Finance in playing this intermediary role in the region,” he said.

Loans awarded under the agreement will be available to companies with a maximum of nine employees whose annual turnover does not exceed two million euros.

A large proportion of Baltic companies meet the EIF criteria for receiving business support and as much as 86 per cent of Noviti Finance’s customer base falls within the EaSI microfinance criteria in terms of company size.

“We are very pleased to have established this partnership. It is a great recognition and commitment to be included in the EIF-EaSI guarantee programme. We will be able to provide funding with this guarantee for an even larger number of small businesses that have been potentially ineligible for funding so far, and thus help them to grow successfully,” concluded Mr Armalys.