2014-06-02
The need for enterprises to borrow is increasing; majority of enterprises applying for loans receive the entire amount applied for
The major share of enterprises intend to fund their activities and investments with internal resources; but there is a gradual growth in the need for external financing sources, while most of the enterprises that apply to banks for loans receive the amount applied for, according to the survey of non-financial enterprises, conducted by the Bank of Lithuania.
“Although more than 60 per cent of the surveyed non-financial enterprises finance their activities exclusively with own funds, there is an increase in the number of enterprises that intend to borrow. More than a fourth of enterprises in the first half-year of 2014 intend to increase their borrowing from credit institutions. In addition, banks borrow the amount applied for to most enterprises,” says Kristina Grigaitė, Senior Economist of the Macroprudential Analysis Division of the Financial Stability Department of the Bank of Lithuania.
According to the data of the survey, 36.7 per cent of enterprises plan to expand, financing 10.9 per cent of total demand with borrowed funds. The most popular external financing sources for enterprises were bank loans (used by 29.3% of the surveyed enterprises), leasing and factoring (26.3%), account overdrafts and credit lines (25%). More than a fourth of the surveyed enterprises plan to increase borrowing from credit institutions. Industrial enterprises plan to borrow most actively.
Borrowed funds will mainly be used for the repair or acquisition of equipment, machinery and vehicles (40.4%) and acquisition of raw materials or supplies (33.4%), as well as for the construction, reconstruction, rental or acquisition of buildings or engineering structures (12.3%).
In the second half-year of 2013 about one fifth of all surveyed enterprises applied to credit institutions to borrow or change the contractual terms and conditions of their current liabilities. According to the survey data, banks satisfied almost three fourths of all enterprises’ applications and granted the entire amount applied for.
In assessing the bank lending conditions, enterprises noted that recently the possibility to borrow or change the existing contractual terms remains almost unchanged.
In describing the possible operational challenges, the enterprises participating in the survey indicated that more challenges than before would be posed by the lack of qualified staff and the increased tax burden. As posing the least challenges, increased production costs and business partner indebtedness were named.
The detailed Survey (741.1 KB download icon) of Non-Financial Enterprises on Business Financing can be found on the Bank of Lithuania website.