The European Investment Bank (EIB) has backed Lithuanian based fintech, SME Finance, with funding of EUR 80 million to support small and medium-sized Lithuanian, Latvian, and Estonian enterprises in the transport, retail, wholesale, production, and services sectors. It is the largest EIB investment awarded to a fintech lender.
SME Finance, a leading fintech platform for non-banking financing in the Baltic states, will use the investment to meet the working capital financing needs of enterprises through its self-service factoring platform, a fully automated solution through which customers benefit from the fastest factoring approval in the EU.
“Given the current working capital constraints facing small and medium-sized enterprises and the substantially reduced availability of bank loans in the region, this is a timely and much-needed partnership of next-generation financial technology with public financing that will enable SMEs and midcaps across the Baltics to more quickly access financing to overcome their cash flow shortages,” said Mindaugas Mikalajūnas, CEO of SME Finance.
Lithuania, Latvia, and Estonia have seen the largest decline in bank loans awarded to SMEs across the EU region during the period of the pandemic.
The first wave of funding from the EIB is expected to reach businesses by the first half of 2021. SME Finance plans to offer business financing with 4 to 8% annual interest rates. The maximum factoring limit granted to individual enterprises will be capped at EUR 5 million.
Of the EUR 80 million received, 70% (EUR 56 million) will be granted to factoring services for SMEs and 30% (EUR 24 million) to factoring services for midcaps. Approximately 60% of the funds will be allocated to Lithuanian businesses, while the share awarded to Latvian and Estonian enterprises, in a common portfolio of factoring services, will amount to 20% each.
SME Finance was established in 2016 to address an identified funding gap in the financing of working capital for SMEs and midcaps. Since its establishment, the company has financed invoices worth more than 459 MEUR, has provided financing services to 500 clients, and has raised more than 114 MEUR from local and international investors. SME Finance provides short and long-term loans, factoring, and leasing. The company has partnerships with world-leading providers of trade-related insurance solutions, including Euler Hermes and Coface.