Business, Financial Services, Latvia, Loan, Markets and Companies

The newspaper decided to carry out the experiment after the director of a small Riga company turned to the newspaper. The company manufactures electronic devices and was set up five years ago, each year it turns over LVL 30,000 to LVL 40,000.

In April the company received an order that required the company to buy components worth LVL 2000 to LVL 2500, which meant that the company would have to take out a small loan that it would repay in two-three months.

The company is profitable and does not have any debts, the head of the company has an apartment in Riga, a cottage in the country, a garage and a car. Yet he wished to receive the loan without pledging any of his properties as security, and without having to go through bureaucratic procedures.

However, all attempts by the businessman were futile, he saw that it is impossible to receive such loans in Latvia, and turned to the newspaper.

The newspaper decided to stage an experiment to see how much of what the businessman said was true. First the newspaper turned to the government-run Latvian Mortgage and Land Bank (Latvijas Hipoteku un zemes banka), which has a special program for supporting small and medium businesses. The bank refused to give any money, because it only issues unsecured microloans of up to LVL 3000 to companies registered outside Riga. The bank said that interest on such loans is 5-8%, and the loans have to be returned in up to five years.

Companies registered in Riga can only receive such loans from the Mortgage and Land Bank if they follow the usual procedure – put up a property as security, present a business plan, etc. Furthermore, the applicant must have an account in the bank for at least three months prior to applying for a loan.

After that the newspaper's representatives turned to Paritate bank, whose website says that the bank issues microloans from LVL 500 to LVL 10,000 without security, although interest on such loans is 20%. The bank informed, however, that issuing microloans has been suspended for an indefinite period.

Parex banka said that it does not issue loans presently, but the situation could change in one-two months. GE Money Bank, on the other hand, said that it only issues loans to persons who have already taken out loans from the bank in the past. GE Money Bank offered a consumer loan with a 25% interest rate instead.

Similar replies were also received from other Latvian banks, Biznes&Baltija reports.