Holm Bank has conducted a survey of 300 Estonian micro-businesses which has revealed that almost half (47%) of all enterprises with up to 10 workers have decided not to investing in their business in 2021. The investment confidence of enterprises owned by Russian-speaking business people and firms operating in the north-eastern part of the country has been hit especially hard.
According to Holm Bank CEO Rauno Klettenberg, the survey results echo people’s uncertainty about the future. He says that many businesses decided to put off their investment plans solely because they assume the banks that finance development projects will not issue them with loans due to disappointing financial results in 2020. For this reason, he advises, banks should bear in mind the current situation, be more understanding when approving loans for micro-businesses and small businesses and not base their decision simply on the financial results of the previous year.
"We recognise our responsibility as lenders and we’re aware that micro-businesses had a pretty tough year that was substantially different from the norm,” Klettenberg remarked. “That's why our approach is that we won’t turn away business loan applicants simply because their turnover has fallen. So I encourage everyone to discuss their investment plans with us."
Klettenberg says that when processing applications, Holm Bank looks at an enterprise's previous activity, its sustainability and how the loan could contribute to their long-term competitiveness, not just their solvency.
“The experience and background of the person running the company, their partners and how prepared they are to support their own business by matching investments with personal assets play a particularly important role,” he added. “That way, the bank will have more faith in the success of the project as well."
In the survey carried out by Holm Bank, almost 60% of respondents said that they had had to either postpone their investment projects or abandon them altogether: 28% stated that their development projects were still on hold, while 23% of the micro-businesses admitted that they had had to completely forgo their investment plans for 2020. Only 9% of enterprises said that they had completed the investment projects that were put on hold during the first year of the crisis.
According to the chairman of the management board of Holm Bank, investment confidence is a very important indicator of the health of the economy, since enterprises with up to 10 workers constitute the majority of registered businesses in Estonia.
"Micro-businesses are essential in the regions they operate in, as they serve as employers, taxpayers and champions of local life,” he said. “Their investments create new jobs and help to grow the country's economy as a whole. The pandemic year has forced many small businesses to switch to austerity measures and has drained their financial reserves. We need to think about how to restore small businesses' investment confidence – and both state subsidies and banks' loan policies have a role to play in that."
Holm Bank AS is an Estonian-owned bank with an operating licence issued by the European Central Bank. Holm owns the Liisi trademark, which last year celebrated its 25th anniversary. Holm Bank services include Liisi instalment plans, small loans and credit cards, as well as Holm business loans and deposits. In 2020, Holm extended its trademark to Latvia and launched its services on the Swedish market.