According to Bank of Lithuania (LB) data, the ratio of loans to companies and GDP in the country is only 16 percent and is one of the smallest in the eurozone (average – 31 percent). The European Investment Bank survey also shows that the share of companies experiencing difficulties in borrowing in Lithuania remains one of the largest in the EU.

"Only slightly more than a third of companies that have filled out loan applications receive a positive response on the first try. A larger portion of applications are rejected – the number of negative responses would be much smaller if all requested documents were provided and forms were filled out correctly. It's important to know that the rejection of an initial application doesn't mean the bank doors have already closed – it's always worth finding out the reasons for the negative response and trying to eliminate them," says Julius Ivaška, Director of Business Services at Urbo Bank.

According to the expert, the situation is quite paradoxical – overall business loan volumes in Lithuania are growing quite significantly, but at the same time, the number of companies claiming to face insurmountable difficulties in seeking financing is also increasing.

"Perhaps the biggest challenges in this area arise for small and medium-sized businesses. However, they can often be overcome by doing homework before applying for financing," notes J. Ivaška.

Why Do Banks Say "No"?

According to LB data, access to credit for small companies is most limited by strict collateral requirements and insufficient assets suitable for pledging. During the 2024 business survey, as many as 97 percent of companies indicated that lack of collateral was an important factor that discouraged them from choosing external financing.

"Most often we cannot provide loans due to unacceptable financial condition of the company. Frequently, lack of collateral or other security measures also trips them up. Another reason is the lack of logical justification for what purposes the financing is needed. For example, a company with annual turnover of 100 thousand euros and costs of 70 thousand euros requests a 300 thousand euro loan to finance working capital. Such requests raise doubts about business planning and risk management or require more detailed explanations," explains J. Ivaška.

According to him, every financial institution also thoroughly checks the company's history and previous obligations. If the business has had debts, asset seizures, lawsuits, or even bankruptcies, the likelihood of obtaining financing significantly decreases.

Perhaps the most difficult situation is for completely new companies that have neither operating history nor collateral. In such cases, the bank not only carefully evaluates its financial indicators, but also the realism of the business model, management competencies, and market potential.

Three Tips for Getting a Loan Faster

According to the Director of Business Services at Urbo Bank, when a company provides clear and substantiated data, a loan of up to 0.5 million euros can be obtained quite quickly – within 3-4 weeks from application submission. However, in cases of more complex projects, the bank's decision may take longer – depending on asset valuation, business plan substantiation, or legal nuances.

However, the speed of the process also greatly depends on the company itself – whether all necessary information is provided promptly, whether asset valuation has already been arranged, or conversely – whether all necessary documents are only being prepared after the application is submitted.

"First, it's worth preparing all documents in advance – not only financial reports, but also a business plan, asset valuations, contracts with suppliers, etc. Second, it's advisable to justify the loan need – the clearer the investment return logic, the easier it is to get a loan. Third, it's essential to consider and evaluate collateral requirements. It's also worth being flexible – sometimes the bank may offer a different financing instrument than what was requested. In such cases, it's advisable to consider the proposed alternative and discuss it with the bank, rather than automatically rejecting it," advises J. Ivaška.

According to the Urbo Bank expert, this "homework" is an important condition for making the loan acquisition process fast and smooth.

According to LB data, loan growth rates to companies accelerated in April. With the decrease in interest rates, Lithuanian companies were granted new loans worth 334 million euros – a fifth more than in the same period last year.