Practical tips and tools for growing a business

Advice and forms to help in growth, management and development of your business. From financial planning tools to practical suggestions on risk management and everyday work.
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Business development

All about how to grow your business, reach new heights, expand your customer base and improve your cash flow.

Where to look for additional funding?

At the moment when the entrepreneur realizes that it is impossible to cover all the funds needed by the company from the existing cash flow, various options for attracting additional funding are considered. The first choice is most often attracting financing from a commercial bank. Historically, the financing environment of companies and the availability of bank capital are largely determined by the four leading banks, which, according to the statistics of the Financial Industry Association, manage approximately 78% of the total corporate lending portfolio of commercial banks. However, only two of the leading banks have grown their corporate loan portfolio in 2021, moreover, due to the events of 2022, the banking sector has become even more conservative in business financing. The prudence of banks does not reduce the need for financing in business, as a result of which entrepreneurs also look for financing in less popular banks or in the alternative financing sector. How to navigate the range of available financing and which financing is the most suitable for your company?

Changes in leadership positions
When thinking about the most popular commercial banks among entrepreneurs in Latvia, the usual duo of Scandinavian banks comes to mind - SEB banka and Swedbank, both of which together managed EUR 1.95 billion in 2020. and EUR 1.56 billion. large corporate loan portfolios. In 2020, the portfolios of these two banks made up 48% of the total credit portfolio of business loans of commercial banks. TOP 3 was completed by Luminor banka with EUR 1.4 billion. a large portfolio.

A drastic change in leadership followed in 2021, when Citadele increased its business loan portfolio by 98%, which was an incredible leap against the background of other banks. It should be mentioned that the portfolios of the former leaders SEB banka and Swedbank decreased by 8.7% and 2.6% respectively in 2021, which further strengthened the position of Citadele banka as the owner of the second largest portfolio.

These portfolio changes very clearly mark the trends of the leading banks in business financing - while SEB and Swedbanka stand out with lower interest rates, but at the same time reduce financing volumes, Citadele seems to be the most open and active of the big banks. If you receive a refusal of financing from your current bank, we definitely encourage you to approach other credit institutions, especially those that have recently been focused on activating business lending (for example, Citadele or Luminor).

The prudence of leading banks encourages the activity of small banks and the growth of their portfolios.
Companies often give up in their search for bank financing when all four leading banks have been approached, but we have good news - there are six more commercial banks in Latvia that lend to companies, and four of them have increased their corporate lending portfolio by more than 10% in 2021. In the context of the reduction of the portfolio of the two Scandinavian banks, such data most likely indicate the migration of customers to smaller banks as well.

Contrary to the largest commercial banks, the smaller market participants are forced to actively fight for each customer, which is also reflected in lower collateral requirements, higher risk tolerance and smoother evaluation. BluOr bank, OP Corporate bank, Industra bank, Signet bank and Regional Investment bank can be suitable for the implementation of the largest investment projects. It should be mentioned that OP Corporate bank also specializes in leasing financing very successfully, helping you to purchase agricultural, forestry and other specialized machinery with very competitive leasing interest rates. Financing for current assets without collateral is ready to be considered by Industra bank, BluOr banka and Regional Investment banka. On the other hand, Signet banka, in addition to classic financing instruments, also specializes in bond issue projects, which can be particularly useful for larger companies.

Evaluating the entire spectrum and approach of active banking services, we can conclude that products and risk tolerance in the banking market are very diverse. While one bank is cautiously consolidating its portfolio, other market participants rush to take advantage of the business opportunities that have arisen, therefore we invite entrepreneurs not to limit themselves to approaching leading banks, but also to look for financing in smaller banks or in the non-banking sector.

Non-bank financing as a complement to the banking sector is not mutually exclusive.
In situations where the bank cannot finance or bank financing is not suitable, there are many opportunities to solve the financing issue with the help of alternative or non-bank financing. For example, Capitalia's advantages as an alternative lender include lower collateral requirements, faster funding and higher risk tolerance. There are also a number of other specialized lenders, venture capital funds or factoring service providers. Alternative financing can be especially suitable in cases where the company does not have sufficient collateral or a loan is needed for a short period of time (for example, as seasonal financing or for the fulfillment of a specific order).

A bank loan does not exclude the use of additional non-bank financing, and most often even complement each other. Capitalia has a positive story of experience and cooperation with Industra banka, within which the metal product manufacturer RKF Nākotne, SIA successfully refinanced a long-term loan of EUR 800,000 to Industra banka with the help of Capitalia. On the other hand, in cooperation with SEB bank, Capitalia finances the well-known producer of chocolate truffles, Pure Chocolate, in the form of a mezzanine loan. Capitalia actively cooperates with Signet bank in bond purchase and issue transactions.

Having been working with small and medium-sized companies for more than 15 years on a daily basis, Capitalia has a great opportunity to assess the business financing environment and recommend the best solutions to the client, even if Capitaia is not the most suitable financier in a given case. We have also developed a convenient and simple tool that helps to find out which type of financing is the most appropriate in the specific situation and phase of the company's development.

3 books on how to improve your productivity

In the fast-paced everyday life, it can be difficult to understand how to focus your attention. We are constantly bombarded with emails, notifications and other distractions that make it difficult to focus on what is important to us. For ideas on how to focus your energy on the work with the greatest impact, you can draw from these three books, which are also in the library of Capitalia employees.

1. James Clear's Atomic Habits (also translated into Latvian) is a great book for anyone who wants to learn about the power of habits. Clear describes how small changes in our daily routine can make a big difference in our productivity. He also gives practical advice on building good habits and breaking bad ones.

Here are some key takeaways from the Atomic Habits book:
  • Basics of Habit Formation: The author explains how habits are formed and how we can change them.
  • The power of small changes: Kleer argues that small changes in our daily routines can make a big difference in our productivity.
  • The Importance of Reminders and Rewards: Clear explains how small reminders and rewards can help us form new habits and break old ones.

2. Your Brain at Work: David Rock's book is a fascinating look at how our brain works. Rock explains how our minds are built to promote productivity, but also identifies factors that can easily undermine it. The author also provides a series of tips on how to overcome any distractions and improve your concentration skills.

Here are some of our most interesting takeaways from Your Brain at Work:
  • Two modes of thinking in the brain: Rock explains that the brain has two modes of thinking: focus mode and diffuse mode.
  • How to overcome distractions: The author gives advice on how to overcome distractions and focus on absolute focus.
  • The importance of breaks: Rock explains that regular breaks are essential to maintaining focus and productivity.

3. Essentialism: The Disciplined Pursuit of Less by Greg McKeown is a book about the importance of focusing on what is truly important to you. McKune argues that we are often too busy trying to do too much, which leads to burnout and stress. He offers a framework for identifying and eliminating distractions so we can focus on what matters most to us.

Here are some of the most interesting insights from the book:
  • Learn to say no: The author argues that we need to learn to say no both at work and in everyday situations.
  • The power of clarity: McCune explains that we need to be able to define for ourselves what we want to achieve (in life/work) so that we can focus our efforts accordingly.
  • The Importance of Compromise: McCune argues that we cannot achieve and have absolutely everything, so we must be willing to compromise.

These three books are a great resource for anyone looking to increase their productivity. They provide practical tips and strategies that can be easily implemented immediately by gradually adjusting your daily habits. As a result, with relatively little effort, you can learn to manage your time and energy more effectively and achieve more.

Useful contacts for business growth

Entrepreneurs often do not ask us for funding, but for contacts to solve everyday situations of various nature. We do the same and ask our clients for advice and contacts. To make it easier to find such useful contacts, we have collected the most frequently requested service providers that we confidently recommend to our clients in this table.

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We regularly update and supplement this table, and we are also open to feedback and suggestions on how to improve this material.

How to sell a business correctly

There are various reasons why an entrepreneur may decide to sell his business: boredom and the desire to rest, the desire to start something new (start a serial business) or the need to successfully get rid of a troubled company before complications become noticeable. Each of these reasons requires a strategy to properly market the business. Below we have collected practical recommendations on how best to approach a potential buyer and how to sell the company.

1. Prepare for the sale
Selling a business is not a one-day project and can take a relatively long time - even a year or two. Therefore, it is recommended to spend this time improving financial indicators, organizing the company's structure and creating a stable customer base, which will make the company more attractive to a potential buyer.

In addition, you are also aware of all your personal obligations with the company - perhaps, for example, the premises of the company are registered in your name. The fact of the planned sale must also be announced to the existing employees of the company, so that they can decide what to do next with their career - to stay in the company even after the change of owners or to look for new career challenges.

2. Evaluation of the company
In order to avoid disagreements about the value of the company and the sale price, entrepreneurs tend to carry out an official valuation of the company before the sale. The appraiser will consider the value of the company's assets, clientele, public image to determine the final value. An officially determined value can serve as a price to ask a potential buyer so that you don't sell your business for too low a price. Company evaluation is not a mandatory requirement - if, for example, you decide to sell the company to a competitor who is aware of your company's activities and is just waiting to take over your customers, an official evaluation may not be necessary at all. However, the rating is not only able to determine the price of the company (so you can count on approximate sales income), but also expands the range of potential buyers.

In Latvia, various companies deal with business valuation - the most popular examples to refer to are Capitalia, Interbaltija and Auctus Capital.

3. Use of a sales broker
Depending on the size of the company and how much you want to be involved in the sales process yourself, it is also possible to hire a company sales broker. Capitalia also offers business sales consulting. For a commission (usually a few percent of the sale amount), the broker will find and approach potential buyers and manage the sales process. Thus, you as a business owner will only have to review the broker's offers and pay the commission at the end of the process. Such a step is advantageous if you do not want to spend time looking for a potential buyer yourself.

On the other hand, if the buyer is already known, for example, an employee of the company or a reliable family member, there is no need to involve a sales broker in order to avoid the commission fee and arrive at the final result faster.

4. Preparation of documents
Regardless of whether you choose not to use the services of a sales broker and look for a buyer yourself, you will need to prepare various documents. Operational financial data, annual reports with various transcripts, lists of assets, customers and suppliers, active liabilities... a potential buyer may be interested in all of this. In order to create a more convincing impression of the company, we recommend that you also prepare a short description of the company's activities, which will introduce the company's activities and the reasons for the sale. If the company is not very presentable and you want to get rid of it before potential losses in the future, you should pay special attention to this step. If all the documents are not in perfect order and do not reflect the company in a good light, the company's sales opportunities can be drastically reduced.

Pay attention to whether all the equipment belonging to the company is still ready for work - their presence will lower the value of the company in the eyes of both the company appraiser and the buyer. If the equipment is vitally needed, it is recommended to restore it or buy a new one before selling.

5. Finding a buyer
If you want to leave the task of finding a suitable buyer to yourself, you should be prepared that it can be a time-consuming process. The buyer can be either a competitor or a cooperation partner (who would like to expand their activities) or a high-level employee of the company. Do not focus on one desired option - this way you will be able to look at different potential options. If you are approaching buyers yourself, contact three to five potential buyers first to consider different options.

Although the buyers will likely have many questions about the company and your sales motives, you should not forget to ask the buyers themselves, so as not to waste time in fruitless conversations. Buyers must be asked about:
- their planned purchase price,
- for the available funds - whether the purchase will be made with the own funds or with the help of externally attracted funding ; whether such a step has already been discussed at an indicative level with the bank.

6. Signing of documents and conclusion of the transaction
Once the buyer has been found, all that remains is the most important thing - closing the deal and signing the sales contract. Contract drafting discussions can also get quite intense. Therefore, if you choose to sell the company without the involvement of a sales broker, consider hiring a knowledgeable lawyer who will take care of the appropriate terms of the contract. It is important to remember that the fact of sale occurs only when the buyer and the seller have fulfilled their obligations. Obligations are not only a transfer of money from the buyer to the seller, but also various requirements that the seller must fulfill, such as refinancing loans, repayment or re-registration of premises.

Gradual payment for company assets is also a common method. In this way, you will be able to transfer the knowledge to the new owner gradually, taking care of the sustainability and continuation of the company. It may also seem like a suitable solution for the buyer if all the necessary purchase funds are not immediately available.

How to determine the value of your company

Usually, a company valuation is required as part of a business transaction, for example, when selling a company, buying/merging with another company or attracting investment . You can also calculate the approximate value of your company yourself, however, business partners can value the opinion of experienced company appraisers, including Capitalia, more highly. Therefore, below we present different methods of how the value of the company is determined and how it is practically possible to improve it.

In order to determine the adequate value of the company, three basic valuation methodologies are used in practice in such situations – the revenue method, the asset method and the comparative company method.

The income method predicts the company's financial performance in the future and determines (capitalizes) the value of future income in the present form. The working principle of this method stems from the fact that receiving EUR 100 now is more valuable than after 1 year, because during this one year it would be possible to invest these hundred euros (for example, in a deposit) and get a larger amount of money at the end of the year. So, in simple words, if a company promises to earn EUR 100 in one year, then the revenue method determines how many euros this future revenue is worth now. The more risk a company's future earnings are exposed to, the bigger the "discount" should be applied to the company's future earnings. For example, if the company's future income were as safe as a deposit in a bank whose rate could be, for example, 10%, then the present value of 1 year's future profit in the amount of EUR 100 would be EUR 100/(1+10%) or EUR 90.90. So the income method states that I would not care if I receive EUR 90.90 now or a company income of EUR 100 a year from now. Based on this basic principle, the future income of the company is predicted and the sum of the present value of all these incomes is determined. The main disadvantage of this method is the difficulty associated with forecasting future income, as well as determining the necessary "discount" (or capitalization rate) for the company's future income.

In order to improve the value of the company according to this method, it is necessary to work on the guarantee of future revenues - to conclude cooperation agreements for longer terms, to attract stable customers with a long operating history who would have a low risk of bankruptcy. However, future earnings can never be fully predicted - in a changing economic and political situation, even the most secure and reliable future earnings can become risky.

The second valuation method is asset valuation . As the name of the method suggests, this approach determines the price of the company's balance sheet assets (equipment, inventory, etc.), and all the company's liabilities (bank loans, debts to suppliers, etc.) are subtracted from it. Since this method is not based on subjective assumptions about the company's future performance, the asset valuation methodology can be considered a simpler and more realistic approach to identifying the company's market price. However, this method does not take into account the intangible assets of the company, which are not reflected in the balance sheet (for example, trademarks, developed procedures, customer loyalty, etc.), so the asset method is used basically only when valuing companies in difficulty (close to insolvency) or in case of liquidation. although it is relatively easier to increase this value - by purchasing new assets and reducing liabilities -, in practice, this method is not required in the case of a company sale or investment attraction.

The third method is the method of comparative companies and transactions . Due to its simplicity of use and ideology, this method is often the most popular of the mentioned company valuation techniques. This method states that the market price of a company is derived from the value that buyers are willing to pay for similar company/s. For example, if my competitors have just sold their hotels at a price equal to 50% of their last year's turnover, then my hotel should also be priced at 50% of their last year's turnover. Unfortunately, this method does not take into account the fact that companies, although working in the same field of activity, are different, and these differences are also reflected in the true market value of the company.

Although information about similar companies is worth capturing and taking into account when planning your company's future strategy and development plans, in this case it is difficult to justify why the company's value is higher than other recently sold competitors. Competitor research provides insight into a company's potential value even before ordering a formal valuation, but this method does not have a single answer to how to improve a company's value.

None of the methods described above are without their shortcomings and are applicable to all valuation situations, so professionals usually use several methods in parallel when determining the value of companies. It should also be taken into account that valuations may differ depending on whether the entire company (significant control) or minority parts of the company is being valued.

How to improve customer payment discipline

Timely customer payments are one of the keys to the success of the company's development - they ensure a smooth circulation of cash flow, which further provides the opportunity to regularly expand the range of stocks, purchase new fixed assets, improve the company's efficiency, etc. However, almost every entrepreneur has encountered a situation where a client is regularly late in paying bills. How to get customers to pay their bills on time? We offer six solutions to improve customer payment discipline.

1. Stricter payment terms
Although flexible and customized payment terms for each customer can certainly improve the relationship with the specific customer, there are debtors who will use your hospitality to their advantage and also delay your especially suitable repayment term. In such cases, it is recommended to throw politeness aside and dictate a stricter and shorter payment term. Perhaps such a tactic will motivate the customer to pay more smoothly.

2. Specific payment date
If cooperation with the client is regular, it may be necessary to agree on a specific payment date every month, just like in a bank. Choosing an appropriate date will allow you to send an invoice for the amount to be paid ahead of time, while the client will be able to plan his cash flow in time to make the payment on the specific date.

3. Advance payments
If the cooperation with the client has been started relatively recently, or if he makes orders of an impressive size, an advance payment may be a suitable solution. Perhaps requesting an advance payment will not be a popular decision in the eyes of your customers, but it will ensure the planned cash flow for your company. In addition, advance payments allow you to safely establish new cooperation with customers - after gaining trust, the payment terms can also be varied as far as possible.

4. Factoring
In the framework of factoring (purchase of invoices), the customer transfers the payment not to the seller, but to the financial institution. The financial institution pays up to 100% of the invoice amount to the seller immediately after the invoice is issued and sent to the customer. Depending on the client's country of registration, size and operational history, banks and also alternative financiers offer factoring services to individual clients. Capitalia also offers factoring for Baltic companies.

5. Late payment penalty
It is often possible to motivate customers to make payments on time with the help of late payment fines. The penalty can be, for example, 2% for each day late. In cases where the customer is able to make the payment, but forgets about it or deliberately delays it, the introduction of a penalty can motivate the customer to make the payment faster.

6. Gratitude to timely payers
It is also possible to use a strategy that is completely opposite to fines - to reward those customers who make payments on time. Gratitude should be such that it motivates the client to pay on time, but so that it does not create a hole in your company's budget. Good examples would be gift cards, discounts for future purchases, etc

Loans for companies

Often, in order for the company to develop faster, it is necessary to attract additional financing. Below is how financing can be useful in different industries and how to choose the most suitable type of financing.

Reasons for attracting additional funding

The surrounding anxiety and uncertainty about a possible impending crisis can very easily create stressful conditions for any company. Fears of rising bill costs, inflation and a war just around the corner are forcing businessmen to exercise caution when planning next year's budgets and development plans. However, the possibility of a crisis, if prepared well, is also an opportunity. There are several ways that with additional funding a company can take an important step towards a more stable future.

The right time to buy out a competitor
A potential crisis for one is a new growth opportunity for another. Maybe this is the right time to buy out or merge with one of the rivals? By repurchasing a competitor's company, it is possible to acquire competitor's equipment, product/service installations, as well as customer base. The seller may be happy because he got rid of the stress of the crisis, but your company has developed its dream of expansion. Capitalia's share buyout loan can be useful for a company buyout, in which Capitalia provides a portion of the required purchase amount and helps manage the sale process.

Making a larger purchase before the next price increase
Due to inflation, material shortages and war, prices continue to rise for many more groups of goods and services. Unfortunately, even the most optimistic experts are not yet predicting a price drop anytime soon, so the understandable backlash is to buy spares or equipment at the current price. To be safe, contact the manufacturer or seller and find out if the seller has planned to increase the price. In the event that the entire purchase amount cannot be covered from the company's funds, consider the possibility of financing part of the cost with the help of Capitalia financing or leasing or a working capital loan.

Safety cushion for off-white days
Caution is a welcome trait, and if you're a businessman who believes it's better to have an acorn in your hand than a hunter in a tree (money in your account than in a new machine), we're not going to convince you otherwise. But at a time when costs are rising surprisingly fast, additional working capital funding can serve as a necessary safety cushion to make the crisis seem less dire. With the help of a loan, it is possible to purchase a larger quantity of materials or products before the price rises, and to provide a working capital buffer. Thanks to the personalization of the payment schedule, we can create a repayment schedule that will apply directly to your company's future plans and cash flow.

Refinancing of more expensive loans
For safety reasons, credit institutions are increasingly encouraging companies to settle their credit obligations as quickly as possible and reduce their credit burden. Full immediate repayment of loans is often not so easy to realize, so companies choose to refinance to a cheaper financier. If possible, it is most advantageous for companies to refinance with one of the banks, however, due to the flexible schedule and relatively low interest rate, Capitalia can also help reduce the burden of liabilities. In addition, Capitalia also offers assistance in attracting bank financing as a service, helping the client find the most favorable offer from many capital providers.

What is bridge financing and in what situations is it suitable

A "bridge loan " is one of the possible ways of attracting financing for companies to provide short-term financing for a specific need. The name of the specific service (translated from English - bridge, connection) indicates the use of financing - it is a short-term loan for companies to ensure the missing financing for the implementation of projects.

For example, when expanding the company's production facilities, the company may find itself in a situation where the bank refuses financing until the company has reached the next phase of the project's development. In this case, the company can raise financing for the bridge, knowing that it can be returned with the completion of the construction phase, when the bank grants the loan. Also, companies often use bridge financing during the phase of obtaining money from the European Union fund to ensure the implementation of the project until the support money is received. Therefore, bridge financing can be useful for manufacturers, real estate project developers, construction companies, as well as companies in many other industries that are waiting for another large incoming payment in the near future.

As another example, our client GP Systems has used bridge financing for such a need. This fall, the company signed a contract to build a new telecommunications tower for one of Latvia's mobile operators. Although the terms of the contract provided for a partial advance, it was not enough to implement the project and order all the necessary equipment and materials. The company received a bridge loan for companies in the amount of EUR 75,000 from Capitalia for 4 months, when it is expected to complete the construction works and receive payment of the customer's invoice.

Bridge financing is very often reluctant to be offered by banks, as they much prefer to provide companies with longer terms. As a result, this financing niche is actively filled by alternative lenders, among which Capitalia, founded in 2007, is the leader in the Baltic States. The advantage of non-bank lenders is the speed of the decision and the receipt of funds, as well as the flexibility of repayment terms, adapting to the specific situation of each company.

What are the biggest challenges in real estate development?

With bank interest rates on the rise, as well as the cost of building materials and services, it might seem like the real estate industry is headed for a downturn, but recent observations from Capitalia suggest otherwise. Developers are not only in a hurry to complete the started projects, but are also making plans to start new projects. What are the biggest challenges and trends in real estate development from the lender's point of view?

Despite the price increase.
Almost everyone has felt the rising inflation in recent months, but it has not paralyzed daily activities and spending. A similar observation is in the real estate developer industry. Despite the price increase, developers continue the started projects and fight the price increase in different ways - someone has purchased most of the materials on time, while another accepts a lower project yield than originally planned. Also, during the course of the project, the planned property sales prices are adjusted, taking into account market changes. Alternative financing often helps in solving the price issue, which helps to finance unplanned additional costs during the project.

Growing activity in the region as well.
Since Capitalia started financing development projects in the spring of this year, more and more interest has been received from regional developers in Liepaja, Valmiera region, Salaspils and other cities. For example, in July of this year, Capitalia granted EUR 150,000 in financing to cover additional costs to the real estate developer "Lion estate", which operates on the Liepāja side. On the other hand, in the spring of this year, Capitalia issued a loan for the completion of the "Smailes" project in Valmiera region. Regional projects are often of a smaller size, which accordingly includes less risk both in the construction process and in attracting funding . The proportion of new projects in the region is much lower than in the Riga area. Thus, the demand for apartments in newly built or renovated houses is equally high, which opens up great opportunities for smaller developers in the region as well.

Alternative lenders have their advantages.
Since the geopolitical tensions in Europe, banks' approach to lending has become even more cautious and conservative. In order to receive bank financing for the implementation of a development project, the entrepreneur must ensure his participation in the amount of at least 30-40% of the total amount of the project. In addition, receiving an additional amount to cover unexpected costs is often very difficult or even impossible. Likewise, banks prefer to develop projects in Riga or its surroundings, while regional projects are considered potentially less liquid and profitable. The approach of alternative financiers is more flexible with lower requirements for the entrepreneur's financial participation and security. Also, financing can be received faster than in commercial banks. In case of unexpected costs, it is possible to more promptly agree on adjustments in the financing amount and receive an additional loan, if necessary. All these aspects result in smoother project execution and timely sale of the object. Although bank interest rates are lower, often the earlier completion of a project can offset the difference in interest costs incurred by using more expensive but faster financing.

You cannot live without your own capital.
It is important that throughout the execution of the project, it is in the lender's interest to maintain a healthy loan-to-value ratio (loan-to-value). This means that developers should also consider investing their own capital in the implementation of the project. It is great if the land property on which the construction works are planned to be carried out is already owned by the entrepreneur, the construction site preparation works have been carried out and all the necessary permits have been received. It is more complicated if the entrepreneur wants to implement the project "from scratch", where a loan is already required for the first step - the purchase of land. Such a project will sooner or later reach a loan-to-collateral ratio at which the lender will no longer be ready to provide financing for the continuation of construction work. The recommended own participation is in the amount of 20-30% of the total costs, which not only reassures the lenders, but also provides a small reserve to cover unplanned costs.

Capitalia prefers to finance the final phase of the project
The earlier the project is in the phase, the more risks its realization involves. For example, when starting zero-phase construction works, an entrepreneur may encounter unexpected obstacles in the construction of communications and roads, in the process of coordinating the project and building permit. It is especially risky to attract financing when all legal and preparatory issues have not been resolved. Capitalia recommends attracting financing when all fundamental issues have been resolved and the green light for project implementation has been received. Likewise, the completion of all preparatory work allows the lender to feel more comfortable financing the specific project and provides confidence in the professionalism of the entrepreneur. Capitalia prefers to finance the closing phase of a project when it is satisfied that the allocated financing is sufficient to complete the project. Likewise, in the final phase of construction works, there is a much lower risk of encountering unplanned costs and other surprises, since most of the work is already behind us.

Despite material price and property market changes, Capitalia is willing to get involved in real estate development projects, helping to build a housing fund not only in the surroundings of Riga, but also in smaller cities of Latvia. Together with our clients, we are very proud of the projects we have financed so far and we are actively looking for opportunities to get involved in the implementation of new projects," admits Artūrs Soročenkovs, head of Capitalia's Financing Department.

Alternative financiers versus banks - which is more suitable?

The bank has long been the main financial institution that provides both consumers and companies with the necessary financial resources. Historically, when an entrepreneur needed money for his business, he always turned to his friendly, local bank, which was happy to help with small loans . Today, such personalized banks no longer exist. Banks are now large, international conglomerates with more bureaucracy and more complex procedures. As long as the company is small, the bank rarely sees it as a desirable business loan customer. Compared to larger companies, they are much more risky.

Why are alternative financiers better than banks?
Alternative financing offers two major advantages over banks: much higher approval rates as well as a faster application process.

Alternative financiers are much more flexible
Alternative financiers offer different financing options depending on the specific needs of the company. Banks only offer long-term fixed loans to companies and lines of credit. But small businesses need additional working capital for various reasons - replenishing inventory, paying salaries, paying bills and taxes. Almost every small business buys various types of inventory, but banks don't like to finance their purchase. According to the bank, stocks are no collateral, therefore, if the company goes bankrupt, it would not be easy for the bank to sell these stocks.

Your bad credit is not that significant
If your business has a history of bad credit, you will almost automatically be turned down by the bank. With alternative financiers, a negative credit history does not immediately mean rejection. They will most likely want to see your credit score and history, as well as your current payment discipline. What they really want to know is your ability to repay the loan to the company now and in the future.

You can receive money while you still remember the need for financing
Time is money, and for small businesses it is extremely important to act quickly and efficiently. Things change quickly, and if something goes wrong, it needs to be fixed immediately before customers and turnover are lost. When a new opportunity presents itself, you must be able to say yes before it disappears, even if it means an unplanned cost. Banks are like cargo ships, they cannot react quickly. To apply for a bank loan , you have to go through a large layer of documentation and then spend a long time waiting to see if it will be approved. Bank loans are definitely helpful and when you need them, you need a good credit score. By using alternative lenders, a business can gradually get a better rating and improve its credit history if all payments are made on time.

How to increase the company's chances of receiving financing

Although lenders' criteria for granting financing to small and medium-sized businesses vary, there are several basic rules that entrepreneurs should follow regardless of who they turn to for help. You can familiarize yourself with these basic requirements here.

1. Be transparent and honest about what you need the funding for
If what the entrepreneur told about the purpose of the financing seems illogical to the creditor, it will most often mean a direct rejection. Such a situation indicates that the client is not trustworthy and that the money issued could be used irresponsibly.

2. Prepare all necessary documents in advance
Each lender requires a certain set of standard information, which mostly includes the company's bank account statement for several months, operative financial indicators and other basic information that proves the entrepreneur's connection with the business. It is very useful for small businesses - if all this information is already prepared in advance, the loan will be available to the company faster.

3. Get your credit in order
It is important for small businesses applying for financing to get their credit history in order and pay all late payments. This factor greatly affects the probability of receiving a business loan , as well as changes its size and related costs. Before applying for financing, the entrepreneur must think about how to explain to the lender previous bankruptcies, late tax payments and other unpaid bills.

On the bright side, negative credit can be improved. Contact everyone you owe money to and pay the bills to get rid of the negative records. This will immediately improve your company's chances of receiving financing in the eyes of any potential creditor.

The most suitable financing options for agricultural enterprises

Successful creation and development of an agricultural business is unthinkable without a thoughtful use of financing. The spectrum of farm financing needs has always been broad - from seasonal working capital to large-scale purchases of machinery, land or equipment. Submitting applications and information to several credit institutions is always a time-consuming process, moreover, often the lender's offer is not suitable for the specific financing need or does not meet the expectations of the entrepreneur. How not to get confused in the financial world and choose the most suitable type of financing and service provider?

The planned repayment term as the first criterion for choosing a lender
When starting the search for financing, the first homework of an entrepreneur is to be aware of the financial needs of his business and the planned repayment period of the loan. Historically, both in accounting and in other aspects of the financial world, financing is divided into two basic categories - long-term and short-term financing. The term of the loan usually also corresponds to the nature of the use of financing - long-term investments are usually financed with a long-term loan - purchase of real estate, equipment, machinery, construction projects. On the other hand, short-term financing most often fulfills the function of supplementing current assets - funds for the purchase of mineral fertilizers and other materials, payments for equipment repairs and other services, as well as for the payment of salaries and taxes.

If the bank refuses?
Often, the search for business financing is limited to financing from commercial banks, where after the first refusal, the entrepreneur adjusts or even cancels his financing and growth plans. It should be noted that in addition to bank financing, alternative financing is also available, which can be useful in a situation where bank financing is refused. In the context of geopolitical upheavals, the caution and collateral requirements of commercial banks have increased, which affects the availability of financing for companies that do not have collateral or perfect financial performance. If bank financing is not suitable or not available, we invite you to consider receiving financing from specialized non-bank lenders. Such financing providers include such companies as Capitalia, Agrocredit and others. The advantages of alternative lenders are faster evaluation, lower collateral requirements and higher risk tolerance. Alternative financiers are also much more willing to offer and are often used specifically for short-term lending needs. Although the rates of non-bank lenders will be higher than those of banks due to the additional risk taken, the quick and convenient acquisition of financing often compensates for the higher loan price.

For long-term financing, a commercial bank will most often be the first and right stop
Historically, commercial banks in Latvia focus directly on long-term financing services, and the agricultural sector has always been handy and relatively safe for all leading commercial banks. Although the process of evaluating and receiving financing in banks is often very time-consuming, due to a relatively lower interest rate and long repayment terms, a commercial bank will be the most suitable provider of long-term financing. At the same time, the entrepreneur should expect that the bank will also need a pledge. Agricultural land, buildings, other types of real estate or registrable equipment are most often used as collateral. Despite the fact that the conditions of each bank are slightly different, the loan evaluation time in commercial banks is usually 1-2 months and the amount of financing is around 70% of the offered collateral's market value, determined according to the opinion of a certified property appraiser. Interest rates for long-term bank loans are usually between 3% and up to 6% per year, excluding EURIBOR or the variable part of the rate. It should be mentioned that with the increase of the variable part of the interest rate, the price of bank financing has increased rapidly in the last year, which must be taken into account when evaluating the total cost of the loan.

Equipment purchase = leasing
The purchase of machinery is very common in the agricultural business, as it ensures the most essential function of the farm - field processing and management. Similar to the case of long-term financing, the most optimal solution is likely to be offered by leasing from leading commercial banks. The conditions are especially friendly for the purchase of new machinery, where banks finance up to 95% of the purchase amount, in addition to offering seasonal repayment schedules that are adapted to the cash flow of farms. In the case of classic leasing, the equipment belongs to the leasing company, while the company is registered as its holder. Such a structure provides good security for the lessor, which also results in relatively low interest rates of 2% to 7% per year, excluding EURIBOR.

Complications can arise if the farm purchases equipment that does not qualify for commercial bank leasing (for example, the equipment is too old or specific) or if the viewed tractor equipment is located abroad, where the seller requires the full purchase price before delivery. In such cases, financing from specialized lenders can be useful, where equipment already owned by the farm can be used as collateral, or sometimes financing can be issued even before the viewed equipment is delivered. It should be noted that various non-standard solutions and deviations from generally accepted commercial banking practice also involve additional risks, therefore the price of alternative financing for the purchase of equipment will most often be from 9% per year.

When time is more important than price
In agricultural business, situations often arise when the speed of receiving financing is more important than other conditions. The rising prices of arable land and the high demand for it are very favorable to those who sell it, and often the property is sold to the owner who is able to pay for it the fastest. Clearly, under time pressure, bank financing loses its appeal due to the disproportionately long evaluation periods. For this purpose, alternative or non-bank financing, which provides for faster evaluation terms and lower security requirements, will undoubtedly be the most suitable. For example, in the case of Capitalia, if the entrepreneur has submitted all the information necessary for the evaluation, the decision will take only 1-3 working days and the interest rate will start from 10% per year. The so-called "bridge financing" structure is often used for the operational purchase of properties, i.e. due to time pressure, the entrepreneur receives more expensive alternative financing and after purchasing the property, turns to a commercial bank to refinance the initially received loan for a longer term and a lower interest rate.

Seasonal working capital financing - the most common financing need and niche for alternative financing providers
It is hard to imagine a more seasonal business than grain farming, where almost all the company's income is concentrated in a few months, while the rest of the time the farm's expenses far exceed its income. This situation creates an imbalance in the company's cash flow, which has been further exacerbated by the rising prices of mineral fertilizers and other materials over the past year. Therefore, spring is a particularly active time when farms plan the funds needed for the season and are actively looking for funding to do all the preparatory work for a good harvest.

Similar to long-term loans, credit lines of working capital of commercial banks will also require collateral, while unsecured bank loans often have high qualification criteria, therefore alternative financiers are increasingly addressing this financing need. Fast evaluation terms and lower collateral requirements are the primary reasons why, in addition to commercial bank financing, farms also use alternative financing. Often, all the largest farm assets already serve as collateral for a bank loan, as a result of which it is impossible to receive additional financing. It is a common practice in the non-banking sector to finance without additional collateral, which is especially appreciated by customers.

In order to make the daily life of entrepreneurs easier, we have summarized the financiers most suitable for each agricultural company's needs in the following table:

Long-term collateral financing

Financing for the purchase of equipment

Urgent financing for land or other purchases

Seasonal unsecured working capital financing

SEB Bank

Swedbank leasing

Capitalia

Capitalia

Swedbank

SEB leasing
Agrocredit
Agrocredit
Citadel
Luminor leasing
Lande
Heavy finance
Luminor
Citadele leasing
City Finances
Lande
Alto
Alto
Noviti Finance
Bank of Industry
City Finances
Signet Bank
Agrocredit
SME Finance
Heavy Finance

Company management

A properly managed business = a happy entrepreneur, satisfied customers and employees. Below, everything about business management in different situations.

How to prepare for changing market conditions

During the last year, the business environment has experienced various upheavals, where the difficulties caused by the pandemic have been replaced by a rapid increase in the prices of energy resources and materials. Changing market conditions require careful planning and implementation of preventive measures to mitigate negative consequences. Although it is impossible to see into the future, there are various steps an entrepreneur can take to quickly adapt to changes in the business environment.

Cost review and optimization
As a result of a sharp drop in turnover, it is not always possible to reduce costs as quickly, which can result in losses and a lack of working capital. It is essential to be aware of the largest cost items and maintain them in a healthy proportion to revenue depending on the industry. It is recommended to review all regular invoices once a year and consider whether it is really a significant expense that cannot be lived without. Labor is often the biggest cost - it is important to evaluate the efficiency of personnel and the redistribution of responsibilities in time. It should be noted that successful business continuation in difficult conditions sometimes also requires such unpopular decisions as downsizing the team.

Income planning
Good sales today do not guarantee the same stable income tomorrow. It is very important to maintain regular contacts with the main buyers and orderers, thus monitoring the future intentions of the partners and possible changes in order volumes. If the company's operation is based on cooperation with one or a few large buyers, it is equally important to systematically monitor the financial condition of the buyers and the assigned post-payment limits. If, as a result of the research, a worsening of the client's financial situation is detected or other alarming signals appear, such as an increasing tax debt or publicly registered payment delays, we recommend reviewing the terms of cooperation and payment with the specific client. Diversification of buyers and products may take longer, so it will not be a quick-to-implement crisis management activity, but rather a long-term strategy aimed at by the entrepreneur in order to gradually reduce the concentration of buyers. Diversification of products and services can also be an important aspect for reducing business risk, so that the business does not depend only on the sale of a niche product or service. On the other hand, the free planning tools developed by Capitalia for entrepreneurs can also be useful in cash flow and income planning.

Review of financial obligations
Settlements with lenders in dynamic market conditions can cause quite a bit of worry. It is very important to pay special attention to credit lines and overdrafts that are about to expire, and we encourage you to start negotiations with lenders about the annual extension of credit lines in good time. If you feel that the financial burden is already too great, we encourage you to start negotiations with lenders about schedule changes. On the other hand, if the company has a low amount of financial obligations or no obligations at all, additional short-term financing in the form of a loan or credit line can create an additional sense of security and reserves for unplanned or seasonal costs.

Mitigation of debtors' risks
As a result of fluctuations in the economic situation, the payment discipline of buyers can deteriorate, which can lead to a shortage of working capital and even losses in the case of bad debts. Capitalia has previously collected and published various tips for mitigating the risks of debtors , and we invite entrepreneurs to implement them in their daily business as well. It should be noted that it is important not only to regularly monitor existing debtors, but also to thoroughly research new cooperation partners before offering deferred payment.

Refusing to sell unprofitable products and services
If the company is engaged in the production, sale or provision of services of a wide range of goods, it is very important to realize the profitability of each category of goods or services separately. Sometimes companies continue to produce goods or provide services with low profitability in the name of long-term cooperation or other economically unjustified reasons. If necessary, we invite you to abandon unprofitable products or services, accordingly reducing the costs associated with their production and provision.

Useful tools to improve productivity

In the rush of everyday life, it is often difficult to juggle scheduled meetings, company and team management, personal activities and other responsibilities in time. Fortunately, in the depths of the Internet, there are also various tools available for free that help you both plan your time and improve your and your employees' productivity. Below we have collected some of the most effective time planning tools that we also use in our work organization.

Trello
Trello is a popular project management tool that makes it easy to organize different projects and tasks with note boards, lists, and individual task cards. Being a visual tool, Trello helps you organize all your tasks and projects in an easy-to-understand manner. Each project or task can be assigned a separate card, which can be moved to another list when the project has progressed further or is completely completed.

To get the most out of Trello, start by creating a separate board for each project or area of activity. Then create several lists on each whiteboard, dividing the project or task into different stages of development. Finally, cards are added to each list, thus distinguishing individual tasks to be completed within the project. It is possible to add deadlines when the task must be completed to the cards, different colors to ensure full transparency of the project. Assigning different colors or grades can emphasize, for example, the degree of urgency or status of a task. If the task indicated on the card is complex, it is possible to divide it into even smaller stages with the help of an internal list (checklist).

A separate Trello board for each employee can also be useful, so that no task gets lost between different work responsibilities.

All of Trello's core features are available for free. However, if you have a larger team using Trello, the paid version of Trello will give you more options and the ability to express yourself with more variety of whiteboards.

Google Calendar
Google Calendar is a useful tool for planning your daily schedule and appointments - basically it works as a free digital planner. In Google Calendar, you can create events and appointments, as well as set reminders that are sent to your email or phone shortly before the specified time. It is also possible to send the invitation to the meeting to other participants, and in cooperation with Google Meets, it is also possible to conduct the meeting in the digital environment very easily.

To use Google Calendar effectively, we recommend creating a separate calendar for work and personal life. Then the planned events or meetings are placed in each calendar. Google Calendar also enables regular reminders for recurring events, such as weekly team calls. If all employees of the company use Google Calendar within one Google corporate account, it is also possible to view the calendars of other employees. Such availability of information makes it possible to schedule a joint meeting at a convenient time for everyone. Doodle can also be an interesting tool for finding shared meeting or event times.

If you still choose to combine all your activities in one calendar, we recommend coloring the events corresponding to each area of life in a different color. Thus, when looking at the calendar, it will be immediately clear whether, for example, a business meeting or a personal visit is scheduled today.

Whimsical
Whimsical is a visual collaboration tool that allows you to design charts and diagrams. It is a great helper for generating ideas and organizing thoughts visually, besides, it is possible to collaborate with several people in one "noteboard", giving everyone the right to comment or correct. In our experience, Whimsical is especially useful for dividing a larger process or the creation of a project into separate steps and to understand in what order what steps should be taken for the realization of the project.

To use Whimsical effectively, we recommend creating a new project and choosing a chart or schematic type. Whimsical's free tools and templates will help you create the scheme you want. After creation, it can also be downloaded in the format of your choice.

The free version of Whimsical includes the ability to create unlimited public charts, as well as four privately available charts, which seems to be more than enough, so the free version can get by.

Canva
Canva is a very convenient tool for creating designs, presentations and social media posts, which is easy to understand even for those who are not familiar with Photoshop functions. The program offers various design samples for all situations in life, so all you have to do is supplement the sample with appropriate text, an icon or an image that you can upload yourself or choose from Canvas's range of free visual materials.

In the program, it is also possible to save the company's characteristic color shades or favorite designs - thus you will always be able to prepare design solutions suitable for your brand identity. Similar to Notion, Canva also has a commenting and collaboration option, so your colleagues or employees will also be able to participate in the material development process. For social media posts, it is possible to create a publishing schedule that allows you to plan the publication of prepared designs. Such a feature also helps to ensure that all scheduled posts are consistent with the company's brand and visual identity.

The free version of Canva will suffice as long as you are satisfied with the range of free images and presentation templates available.

Toggl
Toggl is an easy-to-use time tracking program that helps you measure how much time you spend on different tasks. When you start working on a specific project, you can record the time with the help of a timer built into Toggl, and at the end of the day or week, you can see how much time it took to complete each task in the automatically generated reports. The time reports offered by Toggl help you find "time thieves" and help you plan your time more efficiently.

Such a function can be especially useful for improving various processes (with the help of Toggl it is possible to understand which stages of project execution are the most time-consuming) and for making more effective decisions, as well as for studying the workload of employees.

The results collected by Toggl can also be easily integrated with other project management programs, including Trello and Google Calendar.

Tweek.so
A free tool for planning daily work has been developed in Latvia. It allows you to put together planned tasks for the entire working week and mark their completion. The tool is a good replacement for many of the usual work planning in paper calendars. In Tweek.so, you can sort tasks into different categories, add a due date, various reminders, and track their progress.

For example, Tweek.so can be used to plan your daily schedule. The user can mark each appointment or visit as a separate task and place it in a specific category, such as "work" or "personal activities". You can also create tasks that repeat regularly, such as a daily sports practice or a weekly team meeting.

Tweek.so can also be connected to a variety of other productivity tools, including the popular Google Calendar, which helps you group all your to-dos in one place.

Pause Gmail
If you use Google Gmail e-mail for work, then the option to "pause" receiving new e-mails with the Pause Gmail plugin can be useful. No new e-mails will arrive during this time, but you will be able to write replies or compose new letters. Such a pause in the receipt of new letters can give you the opportunity to focus on the work to be done and to answer the letters that have already accumulated at the beginning. Receiving e-mails can be suspended for a certain period of time, for example two hours, during which it will be easier to focus on a specific project.

In addition to Pause, Gmail can be used to read emails more efficiently. For example, by using Pause Gmail throughout the day, except for a couple of hours in the morning or evening, you can set aside a couple of specific hours to devote directly to reading emails. This way, you will be able to filter emails, focusing on the most important emails during the specific hours and leaving the less important emails for another day.

Focus Session
In Windows 11, in addition to the standard clock, Microsoft offers Focus sessions, which consist of, for example, 25 minutes of work and a 5-minute break. During the work session, all notifications from chat programs, etc. are turned off, allowing maximum concentration on a specific task.

As part of the focus sessions, it is possible to start a meditation lesson guided by the tool, which will help clear the mind and focus attention on the task at hand. In addition, a task tracking tool is available in the focus session, which helps you keep track of the time spent and focus on the work to be done. During the focus session, you will receive points for each completed task to keep you motivated. However, if you feel that things are not going well and your thoughts are elsewhere, you can also pause the focus session timer and continue when you feel ready.

A focus session is a useful tool for planning your daily work, as it can help you prioritize the most important tasks and complete them efficiently and effectively. For example, you can use a 25-minute focus session to work on a report or presentation.

An alternative is the so-called Pomodoro timers, such as Pomofocus.io, which also allow you to manage the time of concentrated work and rest.

Debtor risk mitigation tips

Companies often find themselves in financial difficulties, which prevent them from making payments on time. Before starting cooperation with a new partner, it is necessary to make sure that the promising client will pay his bills on time. How to avoid potentially late debtors?

1. Control of debtors. Before providing post-payment to the client, it is worth checking the financial status of the partner. This can easily be done using the information provided by Lursoft and credit bureaus (such as Crediweb). An automatic risk assessment tool is also offered by Okredo, a company that recently started operating in Latvia. When checking the company, it is worth paying attention to such indicators as current tax debts, the amount of equity capital, entries in defaulters' databases and the amount of existing financial obligations. It is important that the company has its own internal (albeit simple) policy on in which cases post-payment is granted and how such post-payment amount is determined and renewed.

2. International databases. Before starting cooperation with a new foreign client, it is increasingly necessary to make sure of the client's reliability and solvency. Information about each company can be found in the company register of a specific country, for example Germany, Great Britain or Sweden - information about late payments and tax debts can provide a deeper insight into the company's payment discipline. It is important to verify the security of the company from the perspective of money laundering risks by checking whether the company and its related persons are not included in the sanctions lists here and here.

3. A debtor control mechanism has been developed. If a customer starts to fall behind on payments, it is important not to shy away from solving the problem and take controlled steps to recover the debt. Many companies have pre-established procedures for what to do if a customer is late on payment. In the first days of the delay, it is recommended to contact the customer by phone or electronically and find out the reason for the delay and the potential repayment time. If the payment is delayed for a long time, it is recommended to gradually send various warnings to the client about publishing the delay in public databases. However, if the customer continues to delay payment or cannot be reached, it is necessary to contact a debt collection specialist who would deal with debt collection through court.

4. Accounts receivable insurance. For businesses with high sales volumes and long payment terms for customers, factoring or receivables insurance provided by a financial institution is a suitable solution to avoid receivables. It is easiest to insure debtors in international transactions that are carried out on a relatively large scale. Such insurance services are offered, for example, by Marine Services Group, Credeo. In international transactions, credit risk insurance is offered in the form of an Altum credit guarantee instrument.

A company's digital presence = a company's business card

With the growing popularity of social networks and digital marketing, every company has to think more and more actively about maintaining its website and presence in social networks. The belief that "if I can't find it online, it doesn't exist" also affects businesses and attracting potential customers. Although most businesses have a website or social media accounts such as Facebook, it may turn out that just having a working website or an active social media account is not enough. Therefore, even if your company does not sell goods or services on the Internet, it is recommended to allocate part of the marketing budget directly to increasing and improving the company's online presence. Below, the Capitalia team has collected various tips on how to make your company's online presence more effective and attractive to customers.

1. Unified content across different social networking platforms
Using different logos, multiple fonts, different font sizes, or conflicting information, such as a business phone number, makes a business look disorganized and untrustworthy. The type and style of communication should also be unchanged - if your company's client is, for example, a start-up, the choice of words and the client's address can be relatively unforced. However, in order not to confuse the client, it is preferable to maintain communication in a similar style on all social networks and platforms - thus, wherever a potential client sees your company, he will immediately recognize it.

2. Domain registration
Not registering a business domain allows anyone to register and use the business name. Identical domains can easily confuse anyone who searches for your company on the Internet and finds another company with the same name. Ambiguity can cause a potential customer to decide in favor of a competing company whose name is the same on all Internet sites. In addition, the first company that registers the specific domain also becomes its owner - if your company misses this opportunity, you should look for new domain and even name options. The domain should be as simple as possible and as close to the real business name as possible. This information also applies to social network accounts. Creating social network accounts does not require a lot of time and money for business , but it can save unpleasant misunderstandings in the future. And it will continue to be as important to control digital assets online as it is to register a company.

3. Correct language without grammatical and spelling errors
Language errors in any text published by the company lowers its value in the eyes of the customer. Even if your clients are not teachers of the Latvian language, overwriting or obvious grammatical errors give the impression that an insufficient amount of work has been invested in the creation of the text and indicate carelessness. Before publishing any text, it is helpful to have a couple of people proofread the text, who might spot errors that the author may not have noticed. If the main language of the website or social network is another language, for example English, it is also worth checking the created article with Grammarly - an application that marks and corrects spelling, punctuation and even style mistakes in the text.

4. Creating a professional email address
By creating an e-mail address intended specifically for business needs, you intuitively indicate to the client that the company's employees know how to separate personal from business relations and are serious about their company. This shows professionalism and a high quality bar for everything the company offers.

5. Regular online communication with customers
Failure to respond to questions or comments on the website and social media can give customers the impression of poor customer service. Customers may suspect that, in the event of an unsuccessful order, returning or exchanging the product could also be a complicated and time-consuming process. Feedback and regular communication with customers can also help improve business performance and customer satisfaction. Although it is not directly related to product sales or quality, it is possible to learn something useful for the company from each comment received. If customers see that you are responding to their messages, they will be encouraged to write back, and this is a good way to gain customer insight into your business and how it works without a large investment .

6. Regular use of social network accounts
Humans tend to bond with things and people they can rely on. If a company-owned social network account exists, but new posts are rarely and irregularly posted on it, it will not bring any benefit to the company. In addition, with today's abundance of information in the digital environment, if a company publishes new information infrequently, it can easily disappear into the depths of the Internet. Regularly posting and communicating with people on social media will not only make your business seem more human and attract new potential customers, but will also satisfy an algorithm that will show your posts more often to random viewers.

7. Regularly updated and improved information
Most often, the first information about a company appears on the web the moment a customer uses the Google search engine. If the information that appears there is inaccurate or outdated (for example, an article about the company's achievements in 2018), the customer's interest in the company and trust in it may disappear. The easiest way to solve this problem is to take control of the information that is distributed about the company. This can be done by registering your business with Google and editing the information that appears when your business name is entered into the search engine. The same applies to the information on the home page. It is very important to follow up so that the information there corresponds to reality and is regularly updated. This will show that you are paying close attention to your company's online image and that no detail has been overlooked. In addition, potential customers will know that you are still active and offer the services mentioned on the website.

8. Website optimization also for mobile use
The use of smartphones has undeniably become an important part of everyday life and business. More and more people are using various search engines on mobile phones to find what they need in their daily run. If a potential customer finds your company's website and tries to view it on a mobile device, but the website is not adapted for such an activity, the texts there will be inconvenient or impossible to read, and the overall appearance of the website will likely be visually unattractive and impractical. By the way, adapting the website for mobile phones also improves the company's SEO rating - how high the website appears in Google's search engine listings. Thus, the optimization of the homepage will also improve the chances of finding the company on the Internet.

9. High-quality visual materials
The human brain processes an image 60 thousand times faster than text, which means that if images are posted on a website or in social networks, they will always create the first impression of a company even before reading any sentence. If the posted image will be of low quality, or out of context, it will accordingly create a bad first impression of the company. As is well known, the first impression is often decisive for the client to understand whether he wants to start cooperation with the company.

Involvement of the investor in the company after the investment

Working in the field of venture capital , we have often encountered businessmen's concerns about the investor's participation in the company after the investment has been made. This fear is both about the board/council member appointed by the investor and his powers, as well as the share control in the company.

It goes without saying that the fear of losing unanimous control is not justified, especially when it comes to investments made by professional investors (companies or individuals whose main occupation is making investments). Investors are ready to invest in the company mainly due to great faith in the management team (founders) and their ability to achieve good profit and growth figures in the future. Thus, the role of investors after the investment remains at the level of investment control or providing general advice, relying on the fact that the other participants will provide the management of the company. Accordingly, everyone does their job.

It is important to remember that the goal of investors is to make money by making good investment decisions by investing in multiple industries and companies. Without management and other participants (or in conflict with them), such a goal cannot be achieved. Investors' role in a company is typically limited to board or board positions, which provide the opportunity to "look after" their investment, as well as share advice and contacts where they can be useful. The better the company and its management team perform, the less control and advice is needed. Therefore, I strongly advise entrepreneurs to avoid the phrase "just looking for money" when addressing potential investors, because it indicates four things:
  • uncertainty about one's competence to manage the company;
  • not wanting to listen to anyone else's opinion;
  • a plan to "extract" money from the company by "putting" on other owners or
  • misunderstanding about the investor's investment motivation.

Does your website need a privacy policy?

Since time immemorial, people have been accustomed to providing their services or goods only for an appropriate remuneration. You pay either with your money or with your data for every product or service you consume. You pay both ways for using some services - for example, a Netflix subscription not only charges a few euros from your bank account every month, but also collects your data about the movies and series you watch.

Since the misuse of personal data can have a significant impact on people's lives, regulators are taking various measures to protect personal data. One of these measures is the need for a privacy policy required by the European Union's General Data Protection Regulation (GDPR).

What is the privacy policy?
The GDPR requires that when using personal data, people must be told why and how their data will be used and what their rights are in relation to their personal data.
This information is usually reflected in a document called a privacy policy, which is published on the company's website.

What is personal data?
Personal data is any information that can be used to identify a natural person. Personal data may include, for example, first name, last name, phone number, email address, location, age, IP address, work email address and other information.
However, personal data is not company data that does not relate to any specific person (for example, an email address info@website.com).

When does your website or application need a privacy policy?
The main criterion is simple - if your company uses personal data, you must have a privacy policy.
Typical cases where personal data is used are when the company:
  • uses online contact forms;
  • send email notifications;
  • process payments;
  • supplies goods or services;
  • analyze website or app visits;
  • uses online questionnaires;
  • uses live chat or chatbot;
  • company users have user profiles.

In these cases, the company uses personal data and the GDPR requires the company to have a privacy policy. If a company uses personal data but you don't have a privacy policy, data protection authorities can fine the company.

In addition, your business service providers may also require you to have a privacy policy. For example, it is currently required by the App Store, Google Play, Google Analytics, Facebook, Shopify, as well as several payment service providers.

Why is a privacy policy important?
If you have an appropriate privacy policy:
  • you comply with the law (GDPR).
  • you avoid unexpected fines. If a company does not comply with the GDPR, you can be fined up to €20 million or 4% of your total worldwide annual turnover (whichever is greater).
  • One of the largest fines for privacy policy non-compliance with GDPR was received by WhatsApp in the amount of 225 million euros.
  • Recently, small businesses and individuals in Europe have also often been fined for not having a privacy policy or for not having enough information in their policies.
  • Thanks to the privacy policy, the company will gain the trust of its customers. Customers will know why you need their personal data and how it will be used.
  • The Company will comply with the privacy policy requirement that may be required by third parties such as payment service providers, app stores and others.

What information should be included in the privacy policy?
The privacy policy should tell you how and why you use personal data. Other information required by the GDPR must also be provided, such as:
  • company/organization information and contact information;
  • which particular website, app or activities are covered by the privacy policy;
  • what personal data is used;
  • why and how the company uses personal data;
  • legal basis for the use of personal data;
  • how long personal data is stored;
  • to whom you disclose your users' personal data and whether you transfer personal data outside the EEA (European Economic Area);
  • users' rights, including the right to submit a complaint to a supervisory authority (in Latvia – Data State Inspectorate).

How can I create a privacy policy?
  • Law firm: The best option, but usually not cheap and does not offer an immediate solution.
  • Online generator: For example, Ligalio's privacy policy generator allows you to instantly create a privacy policy for a website or app at a friendly price using a self-help tool.
  • Templates/templates: usually offer a “generic” version of a privacy policy that does not meet the needs of a particular company, as each company uses personal data differently.
  • Write it yourself: unless you are a lawyer or GDPR specialist, we do not recommend this.

Where should I put my privacy policy on my website or app?
The GDPR does not specify where exactly you must place your privacy policy on your website or app. However, the privacy policy should always be easily accessible. This means that a person does not have to search for information, but it should be immediately clear where and how this information can be accessed.

A direct link to the privacy policy must be clearly visible on every page of the website. Therefore, the most popular place to place a privacy policy on a website is at the bottom of the page, in the footer.

Also, your privacy policy should be easily visible and accessible in your app.

7 accounting formulas every entrepreneur should know

Managing a company's finances and income can be a full-time job. Your company may even employ a full-time accountant. However, many small business owners choose to do their own bookkeeping in order to control and manage their company's finances themselves. If your company also fits into the second category, in this article you will be able to learn some standard accounting formulas that every entrepreneur should know. These formulas are universal, which will be suitable for every business to assess its viability, and will also help to understand whether a business loan is currently the right way to attract financing .

1. Accounting equation
Equation: ( Assets = Liabilities + Equity )

What does it mean:
  • Assets are all things owned by a company, including real estate, money, inventory, and machinery, which provide future revenue for the company;
  • Liabilities include amounts that the company owes to someone, such as lease payments, commissions, payments to suppliers;
  • Equity is the part of a business that is actually owned by its owner.

2. Profit
Equation: ( Profit = Revenue - Expenses )

What does it mean:
  • Income is revenue generated as a result of sales or other positive cash flow that has entered the company;
  • Expenses are costs associated with the sales process.
By subtracting the expenses from the income, you will calculate the profit of the company. This is the amount of money the company will have earned. It is possible that this number will be negative if the company is in the early stages, so the goal of the company is always to turn positive, which means that the company is profitable.

3. No loss point
Equation: ( Breakeven Quantity = Fixed Costs / (Selling Price – Unit Variable Costs ))

What does it mean:
  • Fixed costs are predictable costs that recur to keep the business going. These costs include rent, employee salaries, insurance premiums, etc.;
  • The selling price is the final selling price at which the company sells its product or service;
  • Unit variable cost is the amount it costs to produce one item.
If you divide the fixed costs by the difference created by subtracting the variable costs per product from the selling price, you will get the break-even point, which will help you figure out how many units need to be sold to cover all of the company's costs.

4. Proportion of money
Equation: ( Cash Ratio = Cash / Current Liabilities )

What does it mean:
  • Cash is the amount that is currently at the company's disposal. This may include cash as well as other cash equivalents such as highly liquid investment securities;
  • A current liability is an amount that a business owes to someone.
This ratio shows how well the company can pay its current liabilities. The higher the number, the healthier the business is and the more credit is available to the business .

5. Profitability
Equation: ( Profitability = Profit / Revenue )

What does it mean:
  • Profit is the amount a business has earned after all costs have been deducted from income;
  • Revenue is the total amount of sales that the company has generated.
By dividing the profit by the income, you will get the profitability indicator of the company's profit. High profitability means that the company is doing well, but low profitability can indicate how unsuccessful the business is and that the company is not managing its costs well. Remember that if a company has high sales income but still low profitability, it is the right time to review your cost positions.

6. Debt to equity ratio
Equation: ( Debt to Equity Ratio = Total Liabilities / Equity )

What does it mean:
  • Total liabilities include all liabilities that the company has to cover, such as loans and interest payments;
  • Equity is capital owned by the business owner - in other words, the amount the owner has invested in his company
A high score means that a large part of the company's financing comes from external sources, such as banks. If the company is trying to attract investors , a high score in such a situation can prevent it from attracting additional funding .

7. Production costs of sold products
Equation: ( Cost of production of goods sold = Cost of materials/inventories – Cost of output )

What does it mean:
  • The cost of materials/inventories is the amount of money that your company has to spend to ensure the purchase of all necessary materials and raw materials for the successful production of your product;
  • Cost of output is the total cost of output sold.
By subtracting output costs from material costs, you will know the company's cost of goods sold. This indicator shows the extent to which the cost at which the company produces products is proportional to the selling price of the product.

There are many accounting formulas available, but these seven are some of the most common. It is good to understand these formulas even if you do not plan to keep the company's accounting yourself. Therefore, the greater your knowledge of company finances, the better you will be able to manage your business.

What business plan to prepare?

A business plan, like any written work, should be tailored to a specific purpose. In this article, I review the main differences that should be observed when preparing a business plan for the following three purposes - attracting an equity ( risk capital ) investor, attracting credit , restructuring.

When preparing a business plan for attracting venture capital , it is important to remember that investors invest money in a company to receive a return from the sale of company shares in the future or from dividends. Thus, this business plan should emphasize long-term (five or even more) growth and profit prospects. Financial calculations can be supplemented with an investment return calculation for an investor who would invest in this company/project - in the form of IRR or annual return.

For potential creditors, the most important aspect is not so much the company's potential income and rapid growth potential, but the security of the issued loan and the company's ability to cover interest and loan amortization payments. As a result, the business plan should emphasize the amount and value of the collateral against which the loan would be issued, as well as cash flow data in the medium time frame (2-5 forecast years), which would indicate when and with what "reserve" the loan repayment can be made. Financial calculations can be supplemented with DSCR (debt service coverage ratio) and Credit to EBITDA (earnings before interest, tax, depreciation and amortization) indicators.

The restructuring business plan , compared to the other types of business plan, requires the "shortest" time perspective and typically focuses on a 1-2 year forecast of the company's operation. As the name suggests, the restructuring business plan focuses less on the description of a beautiful and distant future, but on short- and medium-term actions that will lead to quick and improving effects in the company's operations. In the financial section, the unequivocal focus should be on detailed cash flow forecasting and analysis. Detailed monthly forecasts are important for this type of business plan, and analyzes of various development scenarios can be very useful.

What to do if the company is unable to fulfill its obligations

If the company is unable to fulfill its obligations within the specified deadlines, tense situations may arise both in negotiations with financial creditors and suppliers. In this article, we have compiled a list of recommendations for what to do in the following cases:

1. Understand the reasons
An entrepreneur should thoroughly delve into the company's financial data - balance sheet, profit or loss statement and cash flow statement. It is important to be aware of the company's current financial position and what has caused the current cash flow problems. In later communication with your creditors, it is important to be able to identify the causes of the problem in order to then propose a solution to fix it.

2. Identifies the solution
Once the cash flow problem is identified, an action plan is developed to get out of the situation. Such a plan can be related to cost reduction (for example, giving up less important expenses, reducing the number of employees), giving up unprofitable orders or selling assets (unused or unencumbered fixed assets, inventory or stock). In case of overdue receivables, look for a solution with debt collection companies and draw conclusions on how to change the receivables control policy in order to avoid similar problems in the future. There are companies that also purchase delinquent accounts receivable.

3. Go out for talks
Realizing that the company will not be able to pay the creditors, the best thing the company can do is to warn the creditor as soon as possible about the situation. Both lenders and trading partners have a great interest in ensuring that the company can survive the crisis, and will almost always be ready to make compromises in payments in order to help the company in such a situation. In these conversations, it is extremely important to communicate the analysis of the situation (reasons) and solutions - the first two preparatory steps described above. If possible, create your desired payment plan in advance to offer the creditor a ready-made solution.

In conclusion, if the company is not or feels that it will not be able to settle its obligations, it is recommended to start negotiations with its creditors in a timely and proactive manner. It is important in the eyes of creditors to see that the company comes to such negotiations prepared and with a plan. In its long history of financing companies, Capitalia has seen that with such a pragmatic approach it is possible to find a way out of even the most difficult situations and ensure the long-term viability of the company.

Investments and sale of bills

Many entrepreneurs are familiar with the loan function, but are not aware of other forms of financing, including various types of investments and invoice sales. Below is a closer look at various lesser-known forms of funding.

What does the company need - a loan or investments?

When small business owners need financing , they go looking for money. Unfortunately, before doing so, the entrepreneur must first decide what type of capital would be more appropriate in the particular situation. When starting a new business or expanding an existing one, the chosen source of money affects the future operation and development of the company.

There are two types of capital that companies can raise.

Loan for the company : when using a money loan , there is also an obligation to repay this money with a certain interest rate in a certain period of time. The main advantage is that this source of raising capital has no input into the company's decision-making.

The biggest disadvantage of cash loans is that if the company is unable to repay the loan, its owner will often be personally responsible for repaying the loan, or will be forced to return the company's assets used as collateral to the creditor. If the company is unable to repay the loan, then the entrepreneur may lose control over the company in relation to the creditor.

Investment : Cash investment is the purchase of equity shares in a company. This process usually incurs additional costs for accountants and lawyers to document the transaction that occurred. The advantage of this type of financing is that if the money is lost, the owner is not obligated to pay it back.

The main disadvantage of this type of financing is that the investor can usually influence the company's operations and make decisions, and will receive a share of the company's profits. When an investor is attracted to the company, it means that the entrepreneur has a new partner who needs to regularly report on the company's results.

How to choose which type of capital raising is more suitable for your company?

A loan for companies is more beneficial when:

  • Business needs money for a short and specific term. Usually this period is shorter than 2 years. The company already has enough cash flow to repay the interest and principal amount of the loan. Your company's ability to repay a loan can be assessed by modeling the company's cash flow, which is often an approach available in accounting systems.
  • A business needs cash to purchase equipment, seasonal inventory, or other assets that have a specific market value. In these cases, the business loan can be secured by these assets, so it is possible to get a lower interest rate.
Attracting an investor is more profitable when:


  • Business needs money for a long and indefinite period of time. Typically, the investment period is three or more years, depending on the industry and size of the company.
  • Business needs money to significantly increase the company's volumes. In this case, the company must have previously proven itself as a profitable market participant, and the necessary money would help the company reach its maximum potential. To get that amount of money, you may often have to hire a professional management team, additional sales staff, or open new departments.
  • The small business needs additional help in the field of management or contacts that would help to obtain currently unavailable resources. In this case, investors are the “smart money”. In other words, their value is higher than the value of money itself. They usually help companies find new customers or supplier channels.
  • The company is not able to qualify for a loan . It is important to remember that banks will only offer low interest rates to businesses that will not be considered risky. Banks are not investors whose income is based on the success of the company. If the business is new, with negative cash flow, or if the owner has no assets to back the loan, then an investor may be the only way to raise more money for the business.
  • The owner does not want to personally guarantee the loan. Such a requirement is often relevant when financing is raised from a bank or other commercial lenders.

Business Loan or Invoice Purchase?

Financing growing businesses, especially in the small business sector, has always been problematic. While business models and the way companies operate have changed and moved forward, traditional bank financing has remained in place. A loan is always useful for companies , but other forms of financing should not be forgotten.

A business loan is undeniably a useful tool for business development, however, it is important to distinguish situations in which another type of financing might be more useful for a business. Usually, companies' first choice is to apply for a loan at a commercial bank. However, applying for bank loans usually takes a very long time. The procedures are long and impose a heavy administrative burden on the company. Banks often require several years of company data, as well as management documents and cash flow projections. Also, banks expect some collateral, real estate or some other personal assets from the entrepreneur. And even then, a positive decision and successful funding are not guaranteed. Banks review applications in internal credit committees, which may decide that companies are too risky for financing, or may reject if the company represents an industry that the bank has already over-lent and has reached its limit in the bank's loan portfolio. And to get a negative answer, the entrepreneur has to wait several weeks.

Business consultants often inform that a loan is not always the most suitable way of financing working capital. If the company gets a new, important order, the money is needed for the business immediately and spending time on a loan application at the bank is not worth it. Likewise, getting stuck in a repayment period of 12 months or longer to finance an order will incur recurring costs.

In such situations, your company does not need to take on additional liabilities, but rather turn balance sheet assets, such as invoices, into working capital. Invoice financing offers a much more flexible short-term financing mechanism. Invoice financing, or factoring , can help a company get frozen funds faster for invoices that have been issued but are waiting weeks or even months for payment. Using invoice purchase , offered by both commercial banks and alternative financiers, companies can immediately receive up to 100% of the invoice value.

Using outstanding invoices, which show the company's future revenue, provides for needs that need to be met now. On the other hand, in the case of a loan, the amount of money will be paid out once and will have to be returned to the financier over a longer period of time.

4 myths about invoice financing

Invoice sales , or factoring , is a great way for businesses to control their cash flow by ensuring immediate payment for invoices or bills of lading. However, companies often do not use this effective solution due to various unfounded prejudices. We have explored five such common myths.

The first myth: "Such a service is expensive"
Reality : Probably the first myth associated with invoice financing is its cost. When most people think of flexible short-term financing that can be used at any time, the assumption is its high cost. In practice, invoice sales usually do not cost more than other forms of financing , such as a standard loan or overdraft, but can be cheaper due to its short term. In any case, the sale of invoices is always cheaper than the discount that should be offered to the customer for prompt payment of the invoice.

The second myth: "This service is only used by companies in difficulty"
Reality : Invoice financing is a simple and affordable form of financing that helps fast-growing businesses replenish and free up working capital. Capitalia regularly publishes stories from our customers who have been helped by invoice sales to strengthen their day-to-day cash flow management. A supplement of working capital before the season or additional funds for a project - the sale of invoices is an ideal solution for growing businesses.

Myth #3: “My business will have to sell all the invoices I write”
Reality : Many companies are willing to finance only a portion of the invoices issued, such as customers with the longest payment terms. Only some factoring financing providers offer the option to finance only the entire amount of the invoices issued. We recommend choosing a service provider with flexible terms - the possibility to sell specific invoices at the most convenient moment.

Myth 4: “My company will be bound by a long-term contract”
Reality : The service you choose must match the specifics and needs of your business. By concluding an invoice sales agreement, the company can freely choose when and how many invoices are sold, without imposing any long-term obligations. On the other hand, the commission for the use of financing must be paid only if the service is actually used.

Alternatives to venture capital financing

When looking for new sources of financing , companies often turn to various providers of venture capital , which serve as an alternative to a classic loan . One such alternative is a business angel - an investor who will take your company under his wing and help you develop your business faster. For a business angel investor, the average amount of investment tends to be smaller than for venture capital funds, typically from 50 - 100 thousand euros. When attracting capital, you should be careful how much of the company you plan to transfer under the control of a business angel investor. Also, it would be unwise to offer an investor a board member position if they don't have the time, experience or sufficient knowledge of your business.

Likewise, you may also consider the idea of bringing in a strategic investor instead of a venture capital fund. This could be a customer, supplier or other business partner with whom you already work, who might also be interested in investing in your company. A strategic investor usually has "deeper pockets" than an angel investor, but usually has a specific investment objective. Therefore, it is important to find out in advance the real reasons for investing. An investor can use your technology for their own benefit, which can have a negative impact on your business. But there are also cases where an investor wants to invest for the benefit of both parties, so it is always important that you and the investors have the same interests.

Another new opportunity in the Baltics is financing the company's development through the co-financing platform capitalia.com. With the help of such platforms, you can attract the necessary financing without giving the control of the company to the investor. Platform financing also has other advantages, such as quick decision-making and fundraising , flexibility and simplicity.

Before you go to a venture capital fund, clarify your goals. How much capital do you need? Do you want passive or active investors? Are you planning to expand your marketing activities? Increase the management team? By answering these and other questions, you will have a better understanding of who to turn to for investment capital, be it venture capital , business angel, strategic investor, co-financing platform or something else.

If you choose the risk capital route, it is preferable to use a circle of acquaintances who could give the fund good recommendations about you. Also, always do your homework - find out what kind of investments the specific venture capital fund is interested in and what your company's needs are. Come to the meeting well prepared and give a short and concise presentation. Know your main business goals and be honest with your investors when you present them with those goals.

What is invoice sales?

Invoice financing (invoice financing, factoring) is a financial service that makes it easy to get additional money for business. By selling an invoice to a financier, the company can receive money for the delivered product or service immediately without waiting for the invoice payment date. Therefore, such financing is convenient in situations where funds are needed in the short term or when additional financing is needed for the growth of the company.

How is invoice financing done?
1. You deliver goods or provide services to the customer for which an invoice is issued.
2. You send the issued invoice to the invoice financing company.
3. The financier sends you money for the invoice, deducting a commission for the service.
4. Your customer pays the bill to the financier or to you.
5. If the customer pays the bill to you, you then credit the money to the financier.

The invoice sales service has several advantages that can improve the company's economic activity. The first positive feature is that the company can receive money for the product or service immediately, compared to the usual payment period of 30 or more days. Second, you improve the payment discipline of your customers, as they often pay their financial institutions exactly on the invoice dates. Thirdly, through a financier, you can gain additional confidence in the payment security of your customers, as the financiers carry out an independent risk assessment of your customers. It is also important to remember that invoice financing does not appear on the balance sheet as a loan to the company , thus improving the company's financial data.

Therefore, with the help of invoice financing, a company can both provide money for growth and avoid losses that can occur in the case of bad debtors.