To ensure the availability of state-guaranteed credits for factoring transactions to Lithuanian companies, Lithuanian national promotional institution Investicijų ir Verslo Garantijos (hereinafter “INVEGA”) has signed a new cooperation agreement with SME Finance regarding the implementation of the instrument Portfolio Guarantees for Factoring 2. Other participants of financial market are also expected to join soon. An additional sum of 10 million Euro has been allocated to fund state-guaranteed factoring transactions which means that it can guarantee the portfolio of factoring transactions amounting to 62.5 million Euro.
“After the Government has allocated additional funds for portfolio guarantees for factoring transactions, we are trying to make the access to these funds easier for business companies. The list of financial institutions that issue state-guaranteed credits has been expanded and this is yet another step forward to ensure the broader distribution of business aid funds through the financial instruments offered by INVEGA”, says Kęstutis Motiejūnas, the head of INVEGA.
According to the representative of SME Finance, it is critically important to contribute and offer real help for businesses under the present circumstances.
“We are glad to strengthen our partnership with INVEGA. We have worked together since 2018. We were the first representative of the non-bank financial sector to offer our clients INVEGA’s portfolio guarantees for factoring transactions. During the crisis, businesses are in a greater need for help so with this newly signed agreement we will be able to offer a much more active funding to small and medium businesses. From our experience we know that it is a really necessary instrument. The numbers of businesses that are interested in the financial aid and the numbers of their enquiries have increased 5 times during COVID-19 crisis”, says Mindaugas Mikalajūnas, the head of SME Finance.
With the Portfolio Guarantees for Factoring Transactions 2, very small, small and medium companies can receive funding under better conditions in the form of factoring so they can execute their trade transactions. The said instrument is intended to help such companies to manage the lack of working capital to fund sales and thus maintain the operations of these companies.
Each factoring transaction included in the portfolio of the financial institution implementing this instrument will be covered by an 80% guarantee; however, the total sum of all payments cannot exceed the upper limit equal to 20% of the guarantee sum of the compiled portfolio for factoring transactions. The maximum limit for a single factoring transaction is 1,875,000 Euro, or 937,500 Euro for companies engaged in road freight transport activities. The maximum factoring transaction funding period is 12 months.
Companies interested in portfolio guarantees for factoring should apply to financial institutions that have signed cooperation agreements with INVEGA. Each financial intermediary shall examine the applications individually in accordance with its own internal procedures and methods.
The main conditions applicable to portfolio guarantees for factoring transactions are described in a guide prepared by INVEGA that can be found here.