Approximately 6,000 more companies could be financed in Latvia

About 6,000 companies could potentially be financed in Latvia, but the additional lending potential is about 1.4 billion euros, said Ints Krasts, a member of the board of SEB banka, in the presentation of SEB banka’s latest economic review “Nordic Outlook” on Wednesday.

The proportion of loans issued to companies in Latvia to the gross domestic product (GDP) is 13%, informed Krasts. In Lithuania, this proportion is 15%, in Estonia – 26%, and in the European Union on average – 32%.

Likewise, the number of economically active companies, i.e. companies that submitted annual reports, decreases every year in Latvia – 109,233 companies submitted reports for 2022, and 113,921 companies for 2021.

Krast said that 92% of these companies have an annual turnover of up to one million euros, including 60% with a turnover of up to 50,000 euros per year, and 32% with a turnover of between 50,000 euros and one million euros per year. Only about 600 companies have a turnover exceeding 20 million euros per year.

Of the companies that submitted their annual reports, the equity capital of 29,000 companies is negative, or liabilities exceed the value of assets, explained Krasts. According to the calculations of “SEB banka” analysts, approximately 35,000 companies could qualify for the loan, however, approximately 11,000 of them do not have sufficient cash flow to undertake obligations of at least 30,000 euros.

On the other hand, 3,000 companies with EBITDA or profit before income tax, interest, depreciation and amortization of at least 10,000 euros do not have a strong enough capital structure, explained Krasts.

Therefore, approximately 21,400 companies qualify for at least some credit in Latvia, while 10,694 companies have the potential to attract financing. Of these, approximately 4,500 companies have already attracted bank financing, while approximately 6,000 companies could still potentially receive it.

Krasts informed that the largest share of funding is in the agriculture, forestry and fishing sector, where 53% of potentially financed companies have attracted funding. On the other hand, this share is 26% in the manufacturing industry, 17% in transport, and 15% in construction.

Krasts emphasized that the size of the company plays an important role in attracting financing, as companies with a turnover of 50,000 to 1 million euros have the smallest share of loaned companies.

At the same time, Krasts admitted that there is still crediting potential in Latvia, and it should be used. Compared to Estonia, less funding is issued in Latvia in almost all sectors, while in comparison to Lithuania, more funding is issued in some sectors in Latvia.