The Ministry of Economics has developed a new EU fund support program, "Support for small and medium-sized enterprises for attracting financing in the capital markets", which aims to promote the attraction of financing necessary for business development in capital markets, thus increasing international competitiveness of enterprises, and the development of the capital market in Latvia. The support program is currently in the process of coordination and has yet to be approved by the Cabinet of Ministers. It is planned that the support will be available for entrepreneurs from 2020.
“The new support program is just one of the measures implemented this year by the Ministry of Economics to promote investments - that is one of our priorities this year. Rapidly growing companies need to raise capital on the stock exchange to increase their competitiveness. This support program will be the first of its kind in the Baltics; thus, Latvian companies will be the first to have access to state support for raising capital on the stock exchange. Quotation on a stock exchange is valuable in cases where a company lacks the collateral to receive a loan from a bank or has an irregular cash flow and needs financing for a longer period than banks can offer. We expect around 40 companies will use this support facility over the next 3.5 years,” says Ralfs Nemiro, Minister of Economics.
The total funding of the support program is estimated at 2 million EUR, including 1.5 million EUR for share issues and 0.5 million EUR for the support of debt securities. The support will take the form of a grant covering 50% of the eligible costs, up to a maximum of 100 000 EUR in the case of share issues and a maximum of 20 000 EUR in the case of debt security issues.
It is planned that the support will be available for covering preparation costs for the listing of the company in the stock exchange, such as capital attraction costs (including meetings with investors), costs of drafting, approving and publishing the prospectus/enterprise description, due diligence of the issuer, etc.
It is planned that during the program period until December 31, 2023, a total of 40 companies will be supported: 15 companies will be successfully listed on the trading venue and 25 companies will be successfully listed to ensure debt securities on the trading venue.
Latvia is not sufficiently making the full use of stock exchange potential and possibilities of attracting alternative financing in capital markets for financing the enterprises. Currently only four Latvian companies are listed on the Baltic Main List of AS Nasdaq Riga and three other companies are traded on the Baltic Alternative Market First North. There are several reasons for this situation that prevent the quotation of fast growing companies on the stock exchange: the high costs of starting a stock exchange listing; low market liquidity; and a lack of knowledge of the benefits of stock market quotations and a general lack of stock trading culture.
It is possible to get acquainted in detail with the elaborated draft Cabinet Regulation Operational program "Growth and employment", 3.1.1. specific support objective "Promotion of establishment and development of small and medium-sized enterprises, especially in manufacturing and RIS3 priority sectors", and 3.1.1.3. measure "Implementation measures for support to small- and medium-sized enterprises for raising finance on capital markets” in Latvian on the Cabinet website.
