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International Internet Magazine. Baltic States news & analytics Friday, 19.04.2019, 05:49

94% Latvian companies invest own funds in development

BC, Riga, 12.04.2018.Print version
As many as 94% of Latvian companies invest own funds in development, according to a survey about experience of Latvian companies in raising the financing carried out by SKDS pollster for the development finance institution Altum, informs LETA.

SKDS head Arnis Kaktins said at the presentation of the survey on Wednesday that the companies had been asked questions about the sources of financing for business growth that they had used in the last three years.

Also, 33% of companies obtained financing from banks and leasing companies and 26% used other external sources of financing.

According to Kaktins, internal sources of financing are popular among all groups of businesses but large companies are more likely to use external sources than smaller companies. Manufacturing companies turn to external sources of financing more frequently (58%) than service providers (39%).

A half of the respondents gave affirmative answers to the question about whether they had needed new or additional financing in the last three years. The financing was mostly needed for investments in fixed assets (62%), for working capital (49%), for development of new products and services (39%) and for exports (16%).

Among the companies which had turned to financial institutions for financing in the last three years, 38% said they had received the full amount requested, 16% had received less than they had asked for and 26% were turned down. At the same time, 11% of companies chose not to take the loan because they were not satisfied with the terms offered by the financial institutions and 7% would not borrow because of too high interest rates.

An inquiry about the reasons why the financial institutions had turned down their loan applications, 33% of companies said their cash flow was insufficient, 31% could not provide appropriate collateral, 26% had insufficient equity and 16 companies had low profitability/EBITDA but 11% could not provide guarantees from owners and 9% had been in business less than five years.

Kaktins said that the companies which had once been turned down were often reluctant to go to the financial institutions again. Having your loan application rejected is a traumatic experience and it takes some time for businesses to recover from it and build up courage to make a second go, he said.

SKDS carried out the survey in January 10-25 this year among top executives of 2,255 companies working in 11 important branches of the Latvian economy, including wood-processing, energy, construction, pharmaceutical industry, tourism, etc.

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