2015-12-29
Survey: Enterprises borrow less cautiously but claim to be facing credit constraints
While a still large share of enterprises uses only their own funds to finance development, borrowed resources are used increasingly less cautiously, shows the latest Survey of Enterprises commissioned by the Bank of Lithuania. For the first time in the history of such surveys there were more enterprises using external financing sources than those using only their own funds. However, almost half of respondents indicated that bank lending to businesses was at least partially limited.
‘The Survey shows that the number of profitable enterprises and those increasing the number of employees is growing, while for enterprises planning business development it is important to have a chance to choose various financing sources. Even though the majority of enterprises applying to banks claim receiving the entire requested amount, credit availability to small and medium-sized businesses is still limited’, said Simonas Krėpšta, Director of the Financial Stability Department of the Bank of Lithuania.
According to the data of the Survey, more than half of enterprises that participated in the Survey improved their operating results over the previous half-year or they remained stable. Almost 40 per cent of enterprises indicated that their sales income increased, while a fourth of them claimed that it remained unchanged. Slightly more than one fourth of respondents reported that they increased the number of employees.
With regard to the question on the business financing sources, 47 per cent of enterprises reported that they used only their own funds, while 53 per cent claimed to use external financing sources as well. Over the half-year, the share of enterprises using external financing increased by 10 p.p.; this is the first time since 2010 (when the surveys of enterprises were first prepared) that the number of enterprises using external financing exceeded that of those using their own funds. Those enterprises that financed their activities using their own funds alone usually used rent-to-own services (38%), credit line and bank loans (31% each), and trade credit (26%).
For most enterprises (70%) that had applied to credit institutions to borrow or change the terms of current liabilities, the entire amount requested was borrowed. The main reasons for not satisfying or not fully satisfying applications were large current liabilities of the enterprise and poor general economic environment.
Even though the share of rejected applications contracted, there were more enterprises believing that possibilities for borrowing decreased or there were none of them. Almost half of the enterprises that participated in the Survey indicated that credit institutions’ lending to businesses was at least partially limited, whereas only 6.2 per cent of the surveyed enterprises were fully satisfied with the borrowing conditions.
Surveys of Enterprises on Business Financing are conducted twice a year in order to assess the demand of enterprises for financial resources, changes in borrowing from credit and other financial institutions, developments in credit standards, as well as to obtain information on changes in the financial standing and operations of enterprises. The detailed Review (452.8 KB download icon) of the Survey of Enterprises on Business Financing (second half-year) is available on the Bank of Lithuania’s website.