Credit Trends are Changing in the Latvian Business Environment 0 8

The dynamic pace of work intensifies the trend for enterprises to promptly borrow the necessary funds for project implementation and flexibly repay them, using credit holidays and other solutions. Data collected by the financing company Cityfinances shows that entrepreneurs strive to obtain financing within a day and repay it in about a year.

This trend reflects companies' desire to be as flexible as possible, avoiding long-term commitments in an unstable geopolitical and business environment. Reports from the Organisation for Economic Co-operation and Development (OECD) and the European Central Bank (ECB) for 2024 and 2025 also indicate that companies are increasingly using short-term financial instruments rather than traditional long-term bank loans. Several factors contribute to this.

The unpredictable rise in interest rates in 2022 made long-term loans prohibitively expensive, but companies needed funds for development, so they sought to borrow only as much as necessary to minimize interest expenses.

The second factor is the need to obtain working capital quickly and without unnecessary bureaucracy.

"Most often, companies turn to us when they need financing for a specific project. The management knows that payment will come in a few months, but funds for purchasing raw materials, employee salaries, taxes, and other important payments were needed yesterday. Therefore, an operational loan is necessary, which can be repaid soon after the project is completed. Since Cityfinances reviews business applications in 5 minutes and immediately credits the funds to the client's bank account upon approval, entrepreneurs are eager to take advantage of the opportunity to receive financing within one day," says the head of the financing company Ivars Vitols, adding that Latvian enterprises most often borrow between 45,000 and 125,000 euros and repay the loan on average within one year.

OECD data shows that the trend of rapid loan repayment is also observed in other countries around the world. Companies usually borrow working capital for one to two years, while funds borrowed for financing invoices are repaid within 30–90 days.