The Development of SMBs in the Baltic Markets

The talks about developing small and medium-sized businesses in the Baltic region have been happening for a while. The discussion started by Nasdaq Riga implied that SMBs need access to additional funds and possible government ownership to secure international investments back in 2019. For the past six years, a lot has changed on these markers. Tabriz Mamarakhimov, COO of the SEAL Group, a Venture Studio, is taking a look and noticing how the challenges and opportunities are helping SMBs to thrive.

The Current Landscape of SMBs in the Baltic Markets

Government And Institutional Support

In 2020, amidst the COVID-19 pandemic, the European Bank for Reconstruction and Development (EBRD) expanded its program of helping SMBs with research on the market. The EBRD’s combined efforts with Nasdaq allowed to access unique data on the expanding markets and investment opportunities. After that, investors understood where to put their money, even online. The program ran for two years.

In 2022, the European Commission established a fund for helping SMBs. Securing funds was essential to allow the growth of small and medium businesses in the region, as investors seized their operations for a couple of years prior. The goal was to create successful financing channels for the entire region. The Capital Markets Development Accelerator Fund is still up and running.

Not only the large institutions participated, though. For instance, in 2023, the Latvian government started a process of creating an initial public offerings fund, or IPO fund, for small and medium Baltic businesses. The statement also claimed that this fund would be a basis for growing the Latvian economy, as SMBs are essential to the country’s financial state.

Digitalization

Another huge part of the Baltic SMBs’ existence is the digitalization of almost every aspect of the economy and human experience. The transition to the digital world is not always smooth, but many projects are willing to help businesses tackle online with grace. In one of those projects, an online SMB self-assessment toolkit was built so that companies could digitalize their operations and processes without stress.

Other Positive Trends

There are other positive trends in the development of Baltic SMBs. One of them is booming e-commerce, fueled by the “high internet penetration rates and a growing consumer preference for online shopping.” Another two trends are the positive spending dynamics and the Baltic logistics and distribution excellence. All of those contribute greatly to the SMB development in the region.

Challenged SMBs Face

However, the path of small and medium-sized businesses comes with challenges. According to SEB Baltic Business Survey 2024, tax burden, inflation, and energy costs are the most significant issues for SMBs in the Baltic region. Most of them focus on the domestic markets, limiting their flexibility to only the local laws and issues. Here, Lithuanians are more likely to try entering new grounds, though. 40% of Lithuanian companies aim to develop their business and introduce new products or services.

Strategies for SMB Growth in the Baltic Region

Access To Funding

There are a couple of strategies that can help keep the SMBs growing and thriving. The first one is access to funding. European Investment Bank (EIB) wants to help those businesses with investment, so it opened new local offices in 2024. The bank has already led a couple of financing rounds, investing €1 billion in SMBs. Their goal is to grow the region’s economy, and since SMBs play a big part in it, it makes sense.

Expanding Opportunities

Luminor Group reports that the business plans of Baltic SMBs show that 29% of Lithuanian, 36% of Latvian, and 24% of Estonian companies plan to expand in 2024. Lithuanian companies are focusing on increasing production and services, so the overall trend is to grow the business. It is advisable for any small and medium-sized business to start growing and expanding with so many grants, funds, and opportunities available.

Global Growth

Global growth is another vector worth considering. Out of over a third of Baltic SMBs, only 7% delve into non-EU markets. And though it might be scary to look into overseas countries, it is a good option for diversifying the income streaks and broadening your target audience.

Conclusion

The Baltic region presents a dynamic environment for SMBs, offering a combination of strong digital infrastructure, government support, and global trade opportunities. With this continuing path, more and more startups and businesses will receive the support they need to spread their wings and fly. By embracing digitalization, improving financial strategies, and expanding to international markets, SMBs can strengthen their position in the economy.