The company did not receive soft loans for its survival due to the forecast “too poor”: it is called absurd

He asked 100 thousand. EUR

E. Kevišas’s company, as he said, is engaged in inbound tourism to Lithuania. It markets sanatorium treatments and spa services to foreigners in our country.

With the onset of the pandemic, the company was directly affected by the bans imposed by the Lithuanian government on foreigners entering Lithuania.

“Due to the current ban on the provision of sanatorium treatments and spa services, we are still unable to work. During the quarantine, the billing was reduced by 100%, because, unlike restaurants, we cannot provide our services of “Food to go,” said the head of the company.

He explained that in order to pay employee salaries and obtain working capital, the company was forced to borrow, and for 100,000. Eur, as a company affected by COVID-19, requested INVEGA.

“The application asked for a business forecast for 2021. We have honestly written that we cannot predict anything because we do not know when we will be allowed to start work.

If we knew when the quarantine will end, we could predict, but since we do not know and it is not up to us, we cannot predict anything. We have written that, based on the experience of 2020, we expect similar results in 2021 ”, explained the manager.

It is true that, as it assured, INVEGA, after examining the company’s request, gave a negative answer, which is why the projected income in 2021 is too low.

“After receiving this response, I wrote a letter to INVEGA and said once again that our activities are completely dependent on the restrictions imposed by the Government of the Republic of Lithuania and requested to review our company’s application again,” he said.

According to E. Kevišas, it is wrong to require companies to provide accurate forecasts when they do not even know when they will be able to start operating.

“It turns out that we are” penalized “for not making optimistic forecasts, because another business entity with similar indicators, working in the same sector, giving a” more optimistic “forecast, is likely to receive a positive response from soft loans.

I emphasize once again that it is not our billing, the balance, the time of service that is valued, although we have been working for 22 years, not the taxes paid and not even the sector in which we work, but our ‘forecasts’. And this is absurd, “he said angrily, assuring that in this case it turns out that the more the work of a certain company is restricted today and the more difficult it is, the less chance there is of obtaining such credit.

“The money is necessary for the company to survive until the quarantine restrictions end and it can continue to operate,” added the manager.

If you won’t be able to repay, don’t pay

Delfi commented to INVEGA. Its CEO, Kęstutis Motiejūnas, agreed to explain the situation.

“Based on the description of the measure” Direct Covid-19 Loans “approved by the Ministry of Economy and Innovation, INVEGA is obliged to evaluate the borrower’s ability to repay the loan based on the financial data provided by the client with in order to manage credit risk.

To this end, a detailed risk assessment methodology has been developed and validated by means of INVEGA’s internal document. Therefore, it is natural that if the projections provided and the resulting financial indicators show that the borrower will not be able to repay the loan, the loan will not be issued, ”he said.

According to K. Motiejūnas, in this case it should be taken into account that INVEGA specialists in any case evaluate the information provided by the borrowers, verify whether the forecasts are as realistic as possible and respond to the development perspectives and trends of a sector in particular.

Therefore, in case of uncertainty, INVEGA specialists ask the borrower questions, review the information provided, and there are cases in which they simply ask to review unrealistic financial forecasts.
Specifically, this company has a loan contract signed with one of the banks, according to which it has to repay a large amount of the loan to the bank in the third quarter of 2021, and it does not have and will not be able to earn funds for that repayment. Therefore, in this case INVEGA cannot issue an additional loan as the probability of repayment would be too low.

In such and similar cases, we try to advise companies to explain options, such as how to restructure or defer the repayment terms of other liabilities, in order to repay both the INVEGA loan and other liabilities at a realistic rate.

And there are definitely cases where companies manage to do that, ”he said.