News

2020.04.21 18:00

Support for Lithuanian businesses hit by delays

To stave off a wave of bankruptcies, the Lithuanian government rolled out a series of instruments, including loans for businesses struggling to pay their bills. However, some companies have reported troubles accessing the crucial support.

In 2016, Martynas Vidžiūnas opened Kane's Arena, a sports and entertainment venue in Šiauliai, northern Lithuania. However, the family business has been closed since mid-March when the country was put under quarantine.

Read more: Benefits for employers and workers – how to claim

Vidžiūnas said his application for the loan was rejected, because Invega, the government agency distributing the support, deemed his business to be money-losing.

“That is strange, because 2019 was a profitable year for us and we didn't miss a single day to pay our taxes or loans,” Vidžiūnas told LRT TV.

He has invested about 250,000 euros into Kane's Arena and hired a staff of eight people. “We've paid them salaries once already during the quarantine, even though our revenue was zero,” according to Vidžiūnas.

Read more: Government support for businesses and workers – when to claim

He has also applied for payroll subsidies to the Employment Services. The government has promised to cover up to 90 percent of employee salaries, though no more than the minimum wage (or up to 70 percent with the ceiling set at 150 percent of the minimum wage), for businesses forced to close due to the coronavirus restrictions.

Vidžiūnas filed the application on April 15, but has not received any response.

“There was no reaction, no confirmation [that the application was received]. We contacted [the Employment Services], were referred to six or seven different phone numbers and eventually heard that they did get our letter, but hadn't read it yet,” Vidžiūnas says.

Human resource problems

The country’s president, as well as business analysts, have also criticised the delays in providing support.

However, Prime Minister Saulius Skvernelis said Lithuania was one of the first countries to take measures to safeguard jobs and businesses during the coronavirus crisis.

“On March 16 [when Lithuania declared quarantine], the rescue plan was informally agreed on by the government, and was adopted two days later,” he said on Tuesday.

The minister said the delays encountered by Invega have to do with human resources issues, as the instrument wasn’t designed for such emergencies. “We hope the decisions taken on automation will ease the process,” he added.

Over 1 billion euros for downtime payments

Social Security and Labour Ministry spokeswoman Eglė Samoškaitė told LRT.lt the delays should improve next week when the Employment Services will receive new software to expedite the process.

Some 7,600 companies applied for the subsidy by last Friday, asking to cover downtime payments to over 48,000 employees, she told LRT.lt on Monday, adding that about 53,600 euros of the payroll subsidies were to reach 47 companies by Monday evening.

More applicants will receive the subsidy this week, according to Samoškaitė, and the process will speed up once the Employment Services finish installing software upgrades.

In all, the government plans to spend 1.1 billion euros on the instrument, according to Samoškaitė.

Lithuania's Finance Minister Vilius Šapoka said businesses could also increase their liquidity by delaying tax payments and social security contributions.

Loan holidays for households, but not businesses

On Monday, the country's banks agreed to allow households to delay their mortgage payments for up to 12 months. During the loan holidays, people will be exempt from repaying their loans, but will still have to cover the monthly interest rates.

Read more: Banks in Lithuania to offer loan holidays

However, the scheme was not extended to businesses. Lithuania's central bank expects that it will happen eventually.

“It's not about whether we need it, it's about when it will happen,” Jekaterina Govina of the Bank of Lithuania told LRT TV. “From what we know, such an agreement is in the works and we expect to hear positive news about [holidays for] business loans this week.”

Meanwhile, small and medium sized enterprises (SMEs) in Lithuania can already claim compensation for the interest charged on deferred loans and leases.

Double-digit GDP dip

The coronavirus epidemic is expected to hit the Lithuanian economy hard. If the epidemic is contained within the first half of the year, the country's annual GDP may contract 7 percent, according to Finance Minister Šapoka.

However, if the virus continues to spread – and quarantine restrictions remain in place – over the summer, the economy may experience a double-digit dip.

In March alone, the government's tax collection fell nearly 100 million euros below target, according to the Finance Ministry, and revenues from the value added tax contracted 30 percent.

Lithuania's exports may drop 15 percent this year.

Read more: Self-employed Lithuanians receive €257 grants from government