Fidemio: Financing Small Businesses Across Latvia’s Regions
Self-employed people, microenterprises and small businesses form the backbone of Latvia’s economy, accounting for approximately 98% of all registered businesses in the country. Small businesses need financing to grow, yet their size or risk profile often prevents them from securing bank loans. Fidemio was established to address this gap by providing small businesses across Latvia’s regions with access to finance. We spoke to its founder and board member, Andris Keziks, about the company’s plans and the wider economy.
To begin, could you tell Swaper users about Fidemio and what exactly you offer? How does your service differ from those of your competitors?
Fidemio is a financial services provider that offers fast, convenient financing tailored to the business needs of Latvia’s microenterprises, small businesses, and self-employed people. In other words, we help business owners carry out their plans by providing funding when they need it. From the outset, we decided to focus on the regions because our business has two equally important aims. We want to be successful and profitable, and we are equally committed to making Latvia’s financial sector more inclusive, so that small businesses in the regions have the same opportunities as medium-sized and large companies in Riga.
Our core product is an unsecured loan with no collateral, with repayments based on the business’s monthly turnover. In practice, clients repay according to what their actual turnover allows. This approach lets us identify and finance businesses that traditional banks won’t lend to. Basing our offer on turnover also helps us propose terms that business owners can realistically manage within their existing cash flow.
Over time, we also began offering secured loans to give borrowers better terms. Collateral typically includes real estate, such as commercial premises, production facilities, apartments, and houses, or movable assets like production equipment and heavy machinery that can be sold relatively easily.
In terms of cost, our loans fall somewhere between those offered by commercial banks and non-bank lenders. I would say they are closer to bank loans.
The entire process, including signing the agreements, is digital and can be completed remotely. Clients do not need to travel from regional towns to Riga or wait weeks for a notary appointment to sign documents in person.
What inspired the idea? Are there not enough banks and other lenders willing to finance small businesses in Latvia? How would you assess the current state of business lending in the country?
I have worked in lending for more than 13 years, and I have also been on the borrower’s side. I am an investor myself and have advised other investors. Fidemio brings all of that experience together in one product. I have seen the process from many different angles: I have dealt with the complexities of obtaining bank financing and analyzed company financial statements to decide whether to approve or decline a loan. That experience now helps me create a simple, clear solution built around business owners’ needs.
Looking at the lending market as a whole, I would say the vast majority of Latvia’s microenterprises, small businesses, and self-employed people either can’t get funding from traditional commercial banks or cannot afford the high borrowing costs from many non-bank lenders. Yet they are capable businesses who want to grow and develop. We want to help address this problem.
“We want to help address this problem.”
Andris Keziks, Founder and Board Member of Fidemio
What does a typical small business in Latvia look like, and what challenges does it face? I imagine that reviewing loan applications has given you a view of both the businesses themselves and the wider economy.
The picture is rather bittersweet. Small businesses in Latvia really are very small, and many have balance sheets that lead banks to classify them as higher-risk clients or consider them too small. For many banks, serving these clients does not make commercial sense. Many businesses also lack collateral or other security, which would otherwise help them secure better terms and lower borrowing costs.
Latvia currently has around 159 000 registered businesses, of which 157 000 are self-employed people, microenterprises and small businesses. In very few European countries does this segment account for such a large share of the economy. That is an enormous number of businesses that either rely on very expensive alternative financing or see their growth stall for years because they have no means to invest and develop. At the same time, these business owners are determined and sensible, and they care about their businesses’ long-term viability.
What criteria do you use to decide which businesses to finance?
We do not base our decisions on just one or two criteria. We assess a wide range of data to understand whether lending to a particular client is justified and carries an acceptable level of risk. The process usually works as follows: we receive an application, then obtain the business’s management accounts for the past 12 months and a bank statement. We request information from credit bureaus, and our AI tool analyses all of this alongside other publicly available information. Existing borrowing, cash flow trends, current financial performance, the characteristics of the sector and the company’s ability to generate future revenue are all important to our decision.
Based on this analysis, the system automatically sets a maximum credit limit. We can adjust this manually if the client offers additional collateral.
In less than a year, our loan portfolio has grown to almost 2 million EUR. I can honestly say that only one client has been late with a loan payment this year. This reflects both our caution and the accuracy of our borrower assessments.
What have you learned so far about this business, product and sector?
First, I did not expect such strong interest from business owners. That tells me they want to grow and need this kind of financing.
Lending is capital-intensive. Naturally, not all the money we lend comes from our own funds. A large share is external financing, including funding from Swaper. That share will increase as the portfolio grows and requires more capital. For now, this funding is fairly expensive because we are a new business that investors do not yet know.
Another somewhat unexpected lesson has been that Latvia has a fairly supportive regulatory environment for starting this type of lending business. The Bank of Latvia and other supervisory authorities do not put obstacles in your way if you have a clear idea, understand the business, have sufficient funds, and follow clear corporate governance principles. As a financial services provider, we must comply with a wide range of strict requirements, including customer due diligence, internal control systems, anti-money laundering, and data protection. We have been working to apply high standards in these areas from day one.
What are Fidemio’s plans for this year and beyond? Do you want to establish yourselves firmly in this niche, or do you see opportunities to offer other services as well?
Our main goal this year was to establish ourselves in business lending and build a stable, high-quality loan portfolio, mainly serving clients in the regions. We have achieved that. In numbers, our original year-end target was a loan portfolio of 1 million EUR, but we have already almost reached double that figure.
As for additional products, we will start with this one, refine every detail, and gain more experience and a better understanding of running this kind of business in Latvia before considering our next steps.
Thank you to Andris Keziks for taking the time to share Fidemio’s story, its approach to financing small businesses and its plans for the future!
To learn more about Fidemio, one of Swaper’s newest Loan Originators, explore their services and approach to business lending at: https://fidemio.lv/