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.