Signet Bank presents the latest results survey “The Financial Mood of Latvian Entrepreneurs and the Entrepreneurial Environment in Latvia"

The local investment bank “Signet Bank” today presented the latest results of its survey, “The Financial Mood of Latvian Entrepreneurs and the Entrepreneurial Environment in Latvia 2023.”*  The survey focuses on what local businesspeople think and what their hopes are with respect to the need, accessibility and diversity of additional financing during the previous 12 months May 2022 to May 2023.  Questions were also asked about the development plans of companies, as well as their forecasts about the need for additional financing during the next 12 months (May 2023 to May 2024).

During the past three years, global crises have had a very clear effect on Latvia’s economic and financial stability.  This has also led to changes in the country’s business environment.  The “Signet Bank” survey shows that most businesspeople in Latvia are cautious about the possibility of seeking additional financing during the next 12 months. More than 55% say that they have given no thought to such a matter.  There are very few companies in Latvia at this time that have not faced challenges related to the availability of financing during the past year, with only 3% of respondents saying that it was easier to find such funding.  More than half (56%) reported that there were no changes in the availability of financing, while 38% argued that opportunities to receive financial loans during the past 12 months have been limited, and it has been harder to find the financing that is necessary.

Economic development problems in Latvia in the near future will not only be the consequences of global crises, the pandemic and the war. There is also a shortage of ambition among businesspeople.  Faster economic growth will require more information and knowledge among businesspeople about various aspects of attracting financing.  There must be encouragement for new and ambitious ideas and plans that can be implemented.

“Signet Bank” CEO Roberts Idelsons

Availability of financing in Latvia is good, but businesspeople disagree

The survey shows that most businesspeople in Latvia don’t think that diverse versions of financing are available in Latvia, with 40% of respondents in the survey saying so.  They point to issue such as major bureaucracy, rising interest rates, increasing demands from banks, government policies and the overall economic situation.  Only 24% believe that opportunities for additional financing in Latvia are good at this time. Idelsons argues, for his part, that opportunities for additional financing in Latvia are, indeed good, but the problem is that businesspeople don’t have enough knowledge about how to find such funding so as to develop their businesses further.

This lack of knowledge has had a critical effect on the view of people from small and medium enterprises (SME) when it comes to financing. The “Signet Bank” survey shows that only 2% of directors at SMEs believe that the financial sector can help them to attract financing, with 41% arguing that finding financing is impossible or difficult to find.  The lack of knowledge and understanding among SMEs is made clear in a report which the European Union released in May to say that although Latvia has the highest SME need for financing among all EU member states, a lack of belief among businesspeople means that only 28% of SMEs have sought additional financing from banks.  The survey shows that SMEs have not done so because they don’t have the necessary resources, with 30% saying that they have no real reason why they have not sought additional financing, and 3% believe that it is most likely that the bank will say no.  The truth is that banks in Latvia, on average, have rejected only 19% of all applications from SMEs.

Lack of knowledge limits potential for economic growth

The “Signet Bank” survey also shows that only 40% of businesspeople have hard about opportunities in the capital market to attract financing, while 31% have heard nothing at all about that. Of importance in terms of capital market skills are the mass media and social networks. 32% of businesspeople reported that they get most of the information in the public media world. Communications among businesspeople, exchanges of experience and networking are of importance, with 18% of businesspeople saying that they get information from colleagues, 10% declaring that they obtain information online and in face-to-face seminars, and 20% saying that they get information from a financial consultant or a bank.

All told, 83% of businesspeople at this time are not thinking about the opportunities that are afforded by the capital market, and this is largely down to insufficient capital market skills.  Among them, 23% say that they just don’t have enough knowledge about capital market options, 17% think that this would place too much of an administrative burden on them, and 8% assume that the process is expensive.

In comparison to other developed countries, companies in Latvia make very little use of alternative sources of financing, including capital market instruments. This large is down to availability of financing from banks, which serves to limit the developmental and growth potential for the companies and for the national economy.  The lack of knowledge and understanding about the capital market and its advantages very much influences the number of truly ambitious companies and businesspeople in Latvia.

“Signet Bank” CEO Roberts Idelsons

68% of businesspeople reported in the survey that they have heard of Altum support programmes, while 46% said that they have head about public support programmes in Latvia or the EU.  83% of businesspeople have heard about capital market financial instruments – 42% about ways of attracting capital from financial instruments, 19% about floating shares on the exchange, and 22% about the issuance of debt obligations.

69% of respondents do business with large banks such as “Swedbank,”  “SEB Bank,” “Citadele,” “Luminor” or “OP Bank.”  20% don’t rely on bank financing at all.  Only 4% of respondents report that they work with niche local capital banks such as “Signet Bank,” “BlueOr Bank,” or “Industra Bank.” Another 6% have relied on financing from banks abroad.

Only 48% of respondents in the survey said that their bank offers various financing solutions, with 11% reporting that their bank does not do so at all, and 40% saying that they do not really know what opportunities are afforded there.  48% of respondents say that they have no plans to change their bank over the next 12 months, with 14% thinking about ding so, and 38% saying that they haven’t even thought about such a possibility.

The survey covered businesspeople in Latvia from manufacturing, retailing, construction and the service sector.

* The survey to analyse the financial mood of businesspeople in Latvia was conducted in May 2023 with in partnership with the “Mindshare Latvia 2023” media agency.  506 corporate directors in Latvia were asked to discuss the financial situation of their companies, the availability of diverse sources of financing, and the business environment in Latvia during the past 12 months (May 2022 to May 2023).  Respondents were also asked about their development plans and their forecasts about the need for additional financing during the next 12 months (May 2023 to May 2024).

“Signet Bank”

“Signet Bank” was established in 1991 as one of the first banks after the restoration of Latvia’s independence.  The bank has a strategic focus on local businesses and the companies which they control, offering financing and capital management services.  Since the beginning of 2021, “Signet Bank” has issued loans and debt obligations that have provided its clients with financing of nearly EUR 500 million.  “Signet Bank” shareholders are nine Latvian and international private investors.  Leading among them is “SignetAcquisition III” (25%), which is controlled by US investor Aleksandr Solovey.  AS “RIT Group” (19.5%) is a Latvian company owned by the Rappoport family.  SIA “Reglink” (15.93%) was established by banking professional Irīna Pīgozne.