Before the COVID-19 pandemic, Latvia’s economy grew at a steady rate that was higher than the EU average. From 2011 to 2019, Gross domestic product became 3.3% each year on average. In 2019, the development of the economy turned out to be more moderate. Gross domestic product grew by 2% in 2019. In 2020, the Coronavirus pandemic altogether affected the worldwide and Latvian economies. In the second quarter, the Gross domestic product in Latvia diminished by 8.9% contrasted with a similar period in 2019. Notwithstanding, this has all the earmarks of being a relatively gentle decay, as in the EU-27 Gross domestic product shrunk by 13.9% over a similar period. In Q3 and Q4 of 2020, the financial decline marginally slowed down. Generally, in 2020, Gross domestic product diminished by 3.6%, contrasted with 2019. Small and medium enterprises (SMEs) in Latvia have different financing choices accessible to help their development and improvement.
Funding sources
Some normal sources of financial support include:
EU structural funds
Latvia, as an EU part state, approaches Primary Assets intended to advance monetary turn of events. SMEs might profit from these assets for projects that line up with explicit measures.
Latvian Investment and Development Agency (LIAA)
Financial assistance and grants from LIAA are provided to small and medium-sized enterprises (SMEs) engaged in export-oriented activities, innovation, and market research.
Bank advances and credit lines
Customary monetary establishments in Latvia offer advances and credit lines to SMEs. It’s a good idea to talk to the banks in your area about loan options and think about terms like how much you can pay back.
Funding and Confidential Equity
Venture capitalists and private equity firms may be able to provide small and medium-sized businesses (SMEs) with funding for expansion. These financial backers frequently give capital in return for value in the organisation.
Awards and subsidies
Different awards and endowments are accessible from both public and private entities. These might be connected to explicit areas, innovative work exercises, or advancement projects.
Crowdfunding
Web-based crowdfunding stages can be used to raise assets for explicit tasks or business developments. This approach permits SMEs to draw in financing from countless people.
SME driving
Credits to SMEs overwhelm the financial area’s loaning to non-financial companies (NFCs). As SMEs assume a significant part in the local economy of Latvia. Advances to SMEs contained 73% (toward the end of 2020) of complete credits to local NFCs. The extraordinary measure of banking area advances to SMEs diminished in 2020 by 7%. However the complete financial area credit portfolio to NFCs diminished by 8.5%. Generally, this is ascribed to underlying changes in the Latvian financial area (for example, the withdrawal of the credit organisation’s permit). Barring one-off impacts, the SME’s credit stock somewhat declined (- 3.2% year-on-year). In 2020, the new loaning (stream) to SMEs was perceptibly lower than in 2019 (by 20.5%). Despite the increment of completely new business loaning to NFCs by 5.8%.
Optional sources of SME funding
On the approach side, significant advancement has been made to work with SME admittance to fund. In 2014, the Advancement Monetary Foundation ALTUM (hereinafter “Altum”) was laid out. It is a national development finance institution with one location where SMEs can apply for financial instruments (loans, guarantees, equity instruments, etc.) from European, national, and local sources. Latvia has been extremely dynamic in utilising accessible EU primary assets to forestall market disappointments in the monetary area and guarantee that SMEs get the expected ventures so they can develop. Different monetary instruments have been made to work with the accessibility of monetary assets in all phases of business improvement, particularly for beginning a business.
Take away
While considering financing choices, SMEs in Latvia ought to keenly evaluate their business needs, qualification models, and the terms related to each subsidising source. Looking for guidance from local businesses, support associations and monetary counsellors can likewise be significant.
You can also find these articles helpful
Advice for startups in Latvia
Latvian micro-enterprise tax
Choosing the best bank for your business in Latvia
