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Credit agreements with business increased

With the growth of trusted companies in the market, banks and other financial institutions have signed more credit agreements with business in the first half, credit bureau data show.

At the end of June, 83.6% of companies in Lithuania had “good” credit ratings, which indicated that the likelihood of late payment by these companies was low or medium. The number of good companies is 0.4 percentage points higher than a year ago, when it comprised 83.2% of operating companies in Lithuania.

“The proportion of trustworthy companies increased slightly for reasons of the whole. These include the continued creditworthiness of companies, the increase in the share of profitable companies last year and a 0.9% increase in total corporate income. True, corporate financial reports show that overall corporate growth was twice as slow as a year earlier (1.9%), ”says Andrius Bogdanovic, CEO of Basil Ransom, a credit bureau where financial institutions value customer credit.

More credit agreements

More credit agreements

According to preliminary data from the credit bureau, in 2017 In the first half of the year, financial institutions concluded 4% more credit agreements with business than a year ago. The quality of credit issued this year was better than last year. For example, during January-June, credit institutions with credit institutions averaged 5.5 (on a scale from 1 to 10, where 1 indicates the lowest risk). The average credit rating of companies that received financing in January-June last year was slightly “inferior” to 5.7.

In the first half of the year, the need for working capital to borrow decreased, and companies borrowed more for investment by taking long-term loans. The median of working capital loans was LTL 20 thousand. Eur. The median for investment and development loans was 17 thousand. Eur. Service companies accounted for the largest share of credit agreements – 26% – with wholesale and retail companies accounting for 19% and transport companies for 14%.

The economy is growing, so are exports, and low interest rates

The economy is growing, so are exports, and low interest rates

Allow businesses to borrow at a favorable price. In the next half-year we can expect that the need for business financing will not decrease. On the other hand, companies are experiencing a shortage of skilled workers, which turns into uncertainty as to whether the investment will increase their production and customer service capacity. From a financial institution perspective, moderately better corporate financial ratios for lenders are a sign of the growing number of potentially good clients in the market that can be funded, ”says the head of the credit bureau.

Looking ahead to 2018, the Second Payment Services Directive (PSD2), which will enter into force in January, will open up new opportunities for business. Although it poses many challenges for banks, the entry into force of the directive and the transformation of the financial market will in the long term inevitably accelerate the automation of credit solutions and the development of new solutions. Start-up focused funding platforms are already opening up new business finance opportunities.

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