At its April 21 meeting, the cabinet approved a proposal to launch a new subordinated credit scheme to support export-oriented companies.
The "subordinated credit program" financed from the EU structural funds is meant for export-oriented Estonian companies that lack capital or sufficient securities to finance their project, or whose project is found to be too risky by credit institutions.
"Our objective is to improve access to capital. The subordinated loan instrument upholds growth and expansion of enterprises," said Minister of Economic Affairs and Communications Juhan Parts.
Under the new program, two types of credit will be made available - subordinated loans for investment in technology, and subordinated loans integrated into the currently available entrepreneurship support package.
As a result of the recent economic downturn, many businesses have difficulties obtaining credit. For example in case of sophisticated technology investments, commercial creditors require a minimum contribution of 40 percent. But since turnover, profitability and capital dwindled during the crisis, self-financing capacity is still low. Nor have securities recovered their pre-crisis value. However, to prepare for the growth phase, investments are vitally needed for enhancing productivity and expanding into new international markets.
Since Enterprise Estonia's technology investment program and other support measures have now ended, enterprises have been left high and dry, a problem the new instrument aims to correct.
The program, financed by the European Regional Development Fund, is worth approximately 27 million euros, and will be administered by KredEx in cooperation with banks and leasing companies. Loans for technology investment will be available in May, whereas companies qualifying for the support package are eligible for subordinated loans already.