INVEGA loans will help businesses affected by informal Chinese sanctions to target new markets

Due to restrictions imposed by China since the last autumn, Lithuanian business entities face export and import disturbances, products stuck in China and are losing the Chinese market and suppliers of raw materials. Goods from China are diverted to other points of delivery outside Lithuania, which results in losses related to the increase in the price of goods transportation. With regard to the current situation, starting on 15 June 2022, the national development agency Investicijų ir verslo garantijos (hereinafter referred to as INVEGA) provides loans in accordance with the financial incentive instrument of the Ministry of the Economy and Innovation Direct loans to business entities affected by actions of third countries, which will help to reduce these negative consequences and ensure access to finance for businesses that are exposed to a liquidity shortage.

“After China has imposed unofficial economic sanctions, resulting in economic and financial difficulties for Lithuanian business, we, along with the Ministry of the Economy and Innovation, immediately responded to the situation – we started creating a new instrument that will help businesses to search for new markets and export directions and become more resilient in similar situations in the future,” says Kęstutis Motiejūnas, CEO of INVEGA. “We have also addressed the European Commission for notification of the instrument. Usually, such a process takes up to 12 months, but thanks to the concentrated effort and political support, we have managed to offer new direct loans to businesses twice sooner. This is indeed a very short term for instruments where state aid is granted not under one of the existing state aid regimes but is notified to the European Commission separately.”

Instrument can benefit enterprises of any size

According to K. Motiejūnas, the instrument will enable business entities affected by Chinese sanctions to adapt to the new situation in the market, to realign business strategies and improve liquidity. These loans will be available to small and medium-sized enterprises (SMEs) and large enterprises (except for state and municipal enterprises and enterprises where 25% and more of the enterprise’s shares, ownership interest or other interest in capital of the enterprise are held by the state and/or municipality, etc.), in which the shares of imports to or exports from China represented at least 25% of the total imports or exports from 1 January 2021 to 31 December 2021, and if they, after the application to INVEGA is assessed, submit certificates issued by at least three financial institutions denying financing.

The number of loans per borrower is unlimited, but the total amount of loans granted per borrower may not exceed EUR 5 million, and if the borrower belongs to a group of enterprises, it may not exceed EUR 10 million. The amount of the loan will be determined individually for each borrower, after the assessment of the need for financing according to the information provided by the borrower, supporting documents, within the limits of the maximum amount of the loan per borrower. After assessment of the risk level of the borrower and of default on the loan, loan repayment securities shall apply.

Interest on the loans is at a discount

Loans are provided at a fixed annual interest rate, which is calculated at a 70% discount on the margin set out in the Communication from the European Commission and the reference interest rate published by the European Commission. The preliminary fixed annual interest rate on the loan can be calculated with INVEGA’s calculator.

The duration of the loan is 24 months, including the 6-month loan repayment postponement term. Loan agreements must be signed no later than by 31 December 2023, the loan funds are disbursed no later than on 29 February 2024 (the periods for signing loan agreements and disbursing funds may be extended).

The loan is intended for working capital only

The CEO of INVEGA points out that loans are intended to supplement working capital and will have to be used only for search of new resources, targeting new markets. According to the conditions of the instrument, loan funds cannot be used to grant loans, to pay dividends, to repay loans of or grant loans to the borrower’s members, to reduce the authorized capital, to redeem own shares or to make other payments from capital to the borrower’s members. It is also not possible to use these loans to finance or refinance existing financial obligations to financial institutions, to finance investments in fixed assets (including reconstruction) and to pay invoices of Chinese, Russian and/or Belarusian companies.

More information about the instrument is available on INVEGA's website, by phone (+370 5) 210 7510 or by e-mail uzklausos@invega.lt.