The European Investment Bank (EIB) has backed Lithuanian-based neobank, SME Finance, with a funding of EUR 80 million. It is said to be the largest investment awarded by EIB to a fintech lender.

SME Finance had announced their intentions of launching a neobank targeting small and medium-sized enterprises by mid-2021.

SME Finance will use the investment to meet the working capital financing needs of enterprises through its fully automated self-service factoring platform.

“Given the current working capital constraints facing small and medium-sized enterprises and the substantially reduced availability of bank loans in the region, this is a timely and much-needed partnership of next-generation financial technology with public financing that will enable SMEs and midcaps across the Baltics to more quickly access financing to overcome their cash flow shortages.”

says the CEO of SME Finance, Mindaugas Mikalajūnas.

Lithuania, Latvia, and Estonia have seen the largest decline in bank loans awarded to SMEs across the EU region during the period of the pandemic.

The first wave of funding from the EIB is expected to reach businesses by the first half of 2021. SME Finance plans to offer business financing with 4 to 8 percent annual interest rates. The maximum factoring limit granted to individual enterprises will be capped at EUR 5 million.

Of the EUR 80 million received, 70 percent (EUR 56 million) will be granted to factoring services for SMEs and 30 percent (EUR 24 million) to factoring services for midcaps.

Approximately 60 percent of the funds will be allocated to Lithuanian businesses, while the share awarded to Latvian and Estonian enterprises, in a common portfolio of factoring services, will amount to 20 percent each.

Featured image: Mindaugas Mikalajūnas, CEO of SME Finance