Observing the stagnating global and Lithuanian economic situation, economists no longer doubt – a recession will not bypass our country. Rising price spikes scare not only residents but also become a headache for businesses – those who planned to take out loans for expansion now doubt whether the investments would not be swallowed by the crisis. Business loan expert Emilija Poškonienė comments on how it is better to act – to proceed with planned decisions and seek financing, or to wait.

In these uncertain times, of course, the simplest option is to wait and not take risks, yet waiting is not always the solution. Especially when businesses face closure or inevitably lack funds for operations. Rising interbank interest rates, which during the 2008 crisis increased up to 5.4%, do not motivate borrowing decisions today. It should not be forgotten that the margin set by creditors in the market today also varies from 6-7 percent.

"It's no secret that interest rates have started to rise not just because of the economic slowdown. The ongoing war in Ukraine has influenced this. We notice that today's annual interest rates have already risen by 1-2 percent. Unfortunately, attracting investors to the Lithuanian market is becoming increasingly difficult because they know the territory Lithuania is in – we are right next to the aggressor. So, it is definitely more difficult for businesses to communicate with foreign investors right now, and the simpler path at the moment is to seek financing from creditors, but the uncertainty about the rising EURIBOR scares business representatives," says Emilija Poškonienė.

However, if there is no other way and the business needs a loan, Emilija Poškonienė states that unexpected and unpleasant surprises can be avoided by properly choosing the loan terms – looking for those who can lend with fixed interest rates, to whom EURIBOR fluctuations do not make any impact.

"A business that has taken a loan with fixed interest rates can not only calculate how much it will need to pay but also foresee any fluctuations, how to properly organize the company's cash flows so that payments are always made on time. Developing a business already brings various challenges, how to manage, how to expand the business effectively, so fixed interest rates eliminate the factor of surprise when the variable EURIBOR starts to rise. Few appreciate this," comments the head of the 'FinoMark' business loans department.

Previously, the offer of fixed interest rates was not popular in the loan market for businesses – they were more often offered by alternative financiers, crowdfunding platforms. With the changing economic situation and a greater focus on business needs, today more financial institutions are beginning to offer not only variable but also fixed interest rates, whose annual rate in the market currently varies from 7 percent to 16 percent.

"When applying for a business loan at a bank, it used to be common to receive an offer only with variable interest rates. However, now even among banks, one can see a sudden activation of this service – it is a sign that there is a need and it will grow, which shows that borrowing with fixed interest rates is currently a solution for businesses to survive. It's just a pity that not everyone knows about such an opportunity," says E. Poškonienė.

According to the speaker, if a company is currently doing well but faces a dilemma whether to invest in increasing sales by taking out a loan when the sales increase plan is clear and promising but there is fear of the country's economic instability, choosing to borrow with fixed interest rates can help clearly organize the plan, foreseeing crisis scenarios as well. Suppose a company borrows 10,000 euros for a period of 36 months, applying fixed annual interest rates of 8 percent. The total loan amount to be repaid comes out to 11,280 euros, so over three years, the company pays back a total of 1,280 euros extra, paying 313.36 euros per month. The company, having invested 10,000 euros in its operations, can achieve higher results, and the spread-out payments over three years, with a well-arranged financial plan, will be minimally noticeable. Most importantly, the loan repayment will not be affected by fluctuating interbank interest rates.

In all cases, E. Poškonienė does not encourage choosing only fixed interest rates. The benefit of fixed interest rates is best reflected when taking out a loan for a shorter period and smaller amounts, which is relevant for smaller companies or in an unstable economic situation that the country is experiencing now. When borrowing for a few years, it is easy to avoid EURIBOR fluctuations, the fixed interest rate is average, and the overpayment is small.

"Variable interest rates are best chosen when deciding to take a large loan or for a very long term, for example, when the loan period exceeds 10 years. In such cases, even EURIBOR fluctuations eventually become unscary, because over a long period, the overall loan cost increase is not that significant. However, knowing the current global situation, not many businesses are ready to plan their loans more than 10 years ahead. So variable interest rates are becoming less relevant today," advises the 'FinoMark' representative.