Capitalia partners with EIF to provide loan default guarantee on Mintos

30.04.2019

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Capitalia, one of the first loan originators to join Mintos, offers business loans to small and medium-sized enterprises (SMEs), has entered into a partnership with the European Investment Fund (EIF) to provide a guarantee instrument to support small businesses in Latvia, Lithuania and Estonia, for a total amount of EUR 10 million. The European Investment Fund is an agency that was established by the European Investment Bank and European Union for the provision of financing to SMEs across the member countries.

With this guarantee, SMEs will have more accessible financing for business growth. It will also provide an extra layer of risk mitigation for investors on Mintos investing in Capitalia’s business loans.

How does the EIF guarantee work?

The principle of the EIF guarantee (or insurance) is similar to the buyback guarantee available on Mintos, however, there are some unique features. The EIF guarantee covers the principal and up to three months of interest for defaulted loans. Each quarter, Capitalia will make calls to the EIF regarding its obligations of the guarantee and two months after the call is made, the payments from the EIF will be made to Mintos investors who have Capitalia loans that have defaulted.

Furthermore, for all Capitalia loans with the EIF guarantee, the company will maintain a 20% skin in the game. This is instead of the usual 5%, which it has for its other loans available on Mintos. The EIF guarantee covers the other 80% of the loan which is the investor’s share and is capped at EUR 800 000.  As a result, these loans are more secure for investors, but because of this, they will have a lower net annual return from 6-8%.

On the marketplace, all loans with the EIF guarantee will still appear as loans without a buyback guarantee. However, the loans with the guarantee will feature an icon in the “investment breakdown” section. See the picture below.

Which loans are applicable for the EIF guarantee?

As set out by the EIF, it will provide funding for SMEs that have a turnover of less than EUR 2 million and do not have more than 9 employees. Any negative debt entries, including tax debts, or signs of financial distress, will disqualify a company from receiving the guarantee. Under this program, companies will be able to receive financing of up to EUR 25 000 each.

“We are very pleased that Capitalia is the first private alternative financing institution in the Baltics that has qualified for this reputable guarantee program. Conclusion of this deal with the EIF means that we will be able to provide loans to businesses at more favourable rates and without collateral requirements” explains Juris Grišins, manager of Capitalia.

By investing in Capitalia’s loans, not only are you diversifying your investment portfolio, but you are also helping to support SMEs in the Baltics. If you use Auto Invest and want to take advantage of this opportunity, be sure to update your settings accordingly.

 

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