European Investment Fund Invests €20 Million in SG Capital Initiative to Unlock €100 Million in Financing for Latvian Companies

The European Investment Fund (EIF) is committing €20 million to SG Capital’s Latvian investment fund initiative, facilitating access to approximately €100 million in financing for Latvian businesses.

Discussing the fund’s goals, accessibility, and key aspects—an interview with SG Capital partner Harijs Švarcs for Dienas Bizness.

Excerpt from the Interview

Can you briefly introduce this initiative—what types of businesses are eligible for financing, and what is the expected geographical focus of the investments?

We knew that EIF provides an opportunity to attract funding for small and medium-sized enterprises (SMEs), so we developed our proposal, which was approved. SG Capital is creating a dedicated fund specifically for SME financing, with EIF contributing a portion of the funding. Beyond EIF’s investment, our plan is to attract at least an additional €80 million from various funds in Latvia and the Baltics, including pension funds and other institutional investors. EIF particularly focuses on fostering SME development in Europe and Latvia.

It is important to note that, in the Latvian context, a company with 250 or even 500 employees is not necessarily considered small or medium-sized. In fact, over 90% of all businesses in Latvia fall under the SME definition, meaning this funding instrument will be available to a very broad range of companies.

The fund’s goal is to provide loans or purchase bonds issued by Latvian companies. The fund’s mandate is flexible—financing can be structured in various ways without requiring business owners to share their profits or give up equity. The terms are clear from the outset, simplifying decision-making without lengthy negotiations. Private lending funds like this are experiencing rapid growth in the U.S. and Europe. This is precisely why the European Investment Fund sees great growth potential for such initiatives in Latvia and the Baltic region as a whole.

We also observe that Latvia’s bond market is developing successfully, and many businesses seek funding to support further growth. Large institutional investors often lack the capacity to analyze all local market issuances, and these issuances are relatively small in scale. Our fund effectively addresses this issue while also creating an attractive opportunity for pension funds looking for profitable investments in Latvia.

The €20 million from EIF, if I understand correctly, is just the foundation. How much additional funding are you securing from private funds, and what does this mean in practical terms? How many businesses will benefit, and what is the average funding amount per company?

With EIF committing €20 million, we plan to raise at least an additional €80 million from various investors. The total fund size is expected to reach around €100 million, which means financing will be available for approximately 25 to 35 projects. The average project size will be around €3-4 million, though some projects may be smaller or larger than this estimate.

Why do EIF representatives emphasize the high value and importance of this type of lending?

SMEs account for over 90% of Latvia’s economy. This segment often faces difficulties securing financing under acceptable conditions—whether due to collateral requirements or the need for more flexible repayment schedules.

For example, a company may wish to acquire another business in Latvia or abroad to accelerate its growth, or it may require a longer-than-usual repayment schedule for a loan. In such cases, obtaining traditional financing can be challenging. This is where the added value of our financing solution is particularly significant.

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