Holm Bank research: The impact of the crisis on micro-businesses has been smaller than initially feared

08.04.2021

A survey carried out among businesses with fewer than 10 employees has shown that Estonian micro-businesses have survived the 2020 coronavirus crisis better than initially feared. More than 40% of the businesses surveyed stated that the crisis has not had any impact on their turnover, while almost a quarter have only seen a 20% decrease in turnover.

"We conducted an Estonia-wide survey of micro-businesses to better understand their current financial state, their interest in investing in future growth and their expectations of banks,” explained Rauno Klettenberg, the executive director of Holm Bank. “The feedback we got from the 300 respondents is hugely valuable input for us – the majority of our portfolio is directed towards micro-businesses with fewer than 10 employees, who often do business outside of big population centres and offer their services and create new jobs in local communities.”

The survey revealed that more than half of all micro-businesses (55%) have not had to adjust their business flow in any way to survive the pandemic. Only 22% of the businesses made use of the furlough scheme and other support measures offered by the government. There were slightly more who used government support among businesses with 6-10 employees, among which 36% of respondents sought financial aid from the state.

“Not all businesses could keep working the way they used to,” Klettenberg said. “17% of respondents said that they had been forced to cut wages, while 8% of micro-businesses had to lay off employees. The impact of changes like that on businesses with up to 10 employees can be both major and long-term."

Holm's survey has shown that there have been more entrepreneurs who have had to lay off employees or reduce their wages among Russian-speaking business people: whereas among Estonian-speaking entrepreneurs only 23% had to implement such measures, the percentage among Russian-speaking entrepreneurs was 43%.

"The survey also revealed that micro-businesses in North-Eastern Estonia, as well as those led by Russian-speaking entrepreneurs, have suffered most during the crisis,” Klettenberg added. “This segment definitely needs more support to recover from the crisis."

He says that the growth potential of micro-businesses is often realised with the help of relatively small investments. A fifth of micro-businesses have decided to put their investment plans on hold – something which, in Klettenberg’s view, will halt the growth plans of many enterprises.

"In order for micro-businesses to become small or medium-sized businesses, to create new jobs and to invigorate things outside of large population centres, it’s essential to find new ways of restoring trust in investing,” he explained. “Because the greatest asset of any micro-business is its people, their experience and the network of partners they have, which don’t have material value per se, they’re often not in a position of any advantage when applying for loans from the big banks. In 2021, Holm is striving to support the growth of micro-businesses. We have the ability and the experience to offer them flexible solutions that fit their business model and to offer them personalised service when applying for loans and if any problems arise." 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 hire purchase, consumer loans and credit cards, as well as Holm business loans and deposit. In 2020, Holm extended its trademark to Latvia and launched its services on the Swedish market.