Financing SMEs and Entrepreneurs 2024

39. Slovenia

Key facts on SME financing

SMEs represent most of all business entities (99.8% of all of them), of which 90.8% are micro enterprises. In 2022, SMEs contributed 66.9% to the added value of the economy and employed 73.3% of all employees in Slovenia.

In Slovenia, the percentage of established female entrepreneurs has been increasing for three years in a row and reached 37% in 2022, thus above the average level European countries.

As a result of increased business uncertainty due to rise in input prices, uncertainty in supply chains, lower consumer demand, and tightening bank financing conditions including higher interest rates and other costs and conditions, companies were more concerned about the availability of finance. In 2023, access to finance became increasingly constrained.

Interest rates for SMEs declined in recent years, from 6% in 2011 to 2.5% in 2020. However, due to the rising inflationary pressure, the interest rates steadily increased in 2021-2022 period. For example, the monthly base interest rate in December 2022 was 0.8% and an annual base interest rate was already 9.84%.

The government policy response has been primarily through the SID Bank and the Slovene Enterprise Fund. The SID bank, the national development bank, acts as a (1) fund of funds manager for European cohesion funds (ERDF) and managed the EU funds directly or indirectly through the commercial banks or Slovene Enterprise Fund and (2) implemented several loan funds. Additionally, the Slovene Enterprise Fund, acts as a public fund and a financial institution of Ministry of Economy, Tourism and Sports, offering favourable financial resources; grants (for innovative startups, for digital transformation of SMEs, etc.); seed capital; and microloans.

In addition to bank lending from commercial banks, and the SID development bank, the government of the Republic of Slovenia has also implemented a range of measures to fill the gaps in SME access to finance and complement other financial measures. These policies include:

• Blended finance for innovative startups (EUR 2.1 million per year for 40 innovative startups). The government provide grants blended with mentoring and training.

• Blended finance for early-stage start-ups. The government provide seed capital in the form of convertible loans and equity capital blended with mentoring and training.

Table 39.1. Scoreboard for Slovenia

Indicator	Unit	2007	2008	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	2021	2022
Debt
Outstanding business loans, SMEs	EUR billion	7.30	8.12	7.86	9.67	9.79	9.53	5.70	4.31	4.12	4.35	4.61	4.71	4.80	4.74	4.94	5.57
Outstanding business loans, total	EUR billion	16.80	19.94	19.86	20.83	20.09	18.64	14.14	11.21	10.04	9.31	9.31	9.18	9.29	9.09	9.57	10.76
Share of SME outstanding loans	% of total outstanding business loans	43.45	40.71	39.59	46.43	48.75	51.14	40.29	38.47	41.01	46.79	49.52	51.33	51.69	52.13	51.62	51.75
New business lending, total	EUR billion				15.29	18.57	13.71	9.42	8.60	6.98	6.07	5.22	5.65	5.32	6.25	5.53	5.27
New business lending, SMEs	EUR billion				5.89	7.21	5.79	3.64	3.61	2.86	2.86	2.91	2.94	2.26	3.16	2.38	2.41
Share of new SME lending	% of total new lending				59.36	57.93	63.06	56.34	54.99	58.07	56.90	63.55	58.54	53.16	51.91	43.05	45.82
Outstanding short-term loans, SMEs	EUR billion	2.09	2.53	2.15	2.76	3.09	3.19	1.74	0.79	0.61	0.78	0.80	0.83	0.72	0.63	0.62	0.83
Outstanding long-term loans, SMEs	EUR billion	5.21	5.59	5.71	6.91	6.70	6.34	3.96	3.53	3.51	3.58	3.82	3.88	4.08	4.11	4.32	4.73
Share of short-term SME lending	% of total SME lending	28.62	31.19	27.33	28.54	31.55	33.47	30.51	18.22	14.70	17.87	17.26	17.72	14.94	13.37	12.55	14.96
Government loan guarantees, SMEs	EUR million	3.28	22.22	45.20	32.93	19.15	3.07	1012	552.1	0.00	520	710	0.00	0.00	155.9	12.86	-
Non-performing loans, total	% of all business loans	2.52	3.60	6.66	11.16	17.44	22.86	20.31	17.51	15.24	16.82	12.91	8.41	4.46	3.85	2.29	1.82
Non-performing loans, SMEs	% of SME loans	3.77	5.68	8.93	14.68	22.25	28.37	27.57	25.88	24.48	22.92	16.77	10.42	5.98	4.99	3.77	3.17
Interest rate, SMEs	%	7.07	7.46	6.95	5.82	6.01	5.89	5.84	5.19	3.73	3.00	2.77	2.60	2.48	2.53	2.3	2.82
Interest rate, large firms	%	5.55	6.07	4.61	5.02	5.17	4.87	4.52	4.19	2.92	2.19	2.26	2.05	1.64	1.79	1.52	1.92
Interest rate spread	% points	1.52	1.39	2.33	0.79	0.83	1.02	1.32	1.00	0.81	0.81	0.51	0.55	0.84	0.73	0.78	0.9

Source: See Table 39.2.

Macroeconomic and financing conditions

The growth of the Slovenian economy in 2022 was 5.4%, with a strong year-to-year growth predominantly in the first half of the year, boosted by a strong increase in private consumption. Economic growth was also driven by gross investment, which rose by 12.4% in 2022 compared to 2021.

Since September 2020, industrial companies have been reporting an increasingly fast pace of production, which began to slow down in the second half of 2022.

The growth of the economy bounced back to pre-COVID-19levels for the first time in August 2022. The high growth in supply chain orders experienced in Q3 2022 came to a halt in 2023 and fell more noticeably in the last quarter of 2023. The value of manufacturing output increased by 4.1% in 2022, while the total value of industrial output was only 1.7% higher than the previous year, mainly due to a 26.4% decline in the electricity supply activity.

The value of construction work carried out in 2022 was 33.9% higher than in 2021. Despite the weaker outlook, the labour market remained extremely robust, unemployment remained at an exceptionally low level of around 4%, and the number of working-age population continued to increase throughout the year. The unemployment rated has been historically low, even noticeably lower than at the peak of employment just before the outbreak of the global financial crisis. Despite the high inflation rate of 10.3%, wages did not increase resulting in a lower purchasing power of the population. Average net earnings in 2022 were 3.8% higher in nominal terms than in the previous year, and 4.6% lower in real terms.

SMEs in the national economy

SMEs represent most of all business entities (99.6% of all of them), of which 86.8% are micro enterprises. SMEs contributed 66.9% to the added value of the economy and employed 73.3% of all employees in the economy in 2022.

Table 39.2. Number of SMEs in Slovenia

	2016	2017	2018	2019	2020	2021	2022	2022 as a percent
Microenterprise (0-9)	55055	54457	54419	54837	54623	55245	55837	86.83%
Small enterprise (10-49)	5479	5563	5887	6261	6210	6461	6827	10.62%
Medium enterprise (50-249)	1171	1204	1271	1315	1302	1320	1371	2.13%
SMEs - Total	61705	61224	61577	62413	62135	63026	64035	99.58%
Large enterprise (250+)	244	251	263	265	258	266	271	0.42%
total	61949	61475	61840	62678	62393	63292	64306	100.00%

Source: Statistical Office of the Republic of Slovenia

The value of the Slovenian National Entrepreneurship Context Index (NECI) which represents the assessment of the business environment, was 4.8 out of 10, placing Slovenia in the middle of the pack for the Global Entrepreneurship Monitor (GEM), both globally and on the EU level. The persistent improvement of the business environment is reflected in a favourable trend in the development of framework conditions for doing business in Slovenia and a slight rise in the NECI index.

The evaluations in the GEM show that the business environment in Slovenia is gradually improving. Experts cited the dynamism of the internal market, government programmes, and businesses, highlighting how Slovenia developed professional and physical infrastructure needed by new and growing companies, as promising framework conditions for entrepreneurship.

SME lending

Bank of Slovenia conducts an annual survey of enterprises’ access to finance, this is the summary of the latest survey round published in February 2023.

Companies were more cautious about the availability of finance in 2022 and in 2021 (concerns being higher in 2022 than in 2021). Weaker macroeconomic forecasts are reflected in increased business uncertainty due to increase in input prices, uncertainty in supply chains, lower consumer demand, and tightening bank financing conditions including higher interest rates and other costs and conditions. SMEs and were severely affected the deterioration.

The consensus among companies is that access to finance is going to become increasingly constrained in 2023 for all types of finance.

Access to finance was one of the least important constraints for businesses in 2021. They were utmost constrained by rising inflation and uncertain domestic demand, followed by higher operational and labour costs and limited availability of qualified staff or managers. As in previous years, low payment discipline for SMEs is still the most limiting factor.

In 2022, market uncertainty and rising prices have increased the need for financing for enterprises, while the availability of most sources of financing has deteriorated. Thus, the financing gap in 2022 was higher than in 2021 and 2020.

Businesses increased the number of applications for most sources of external financing in 2022.They were successful in obtaining the desired funds for all sources of funding, and the proportion of rejected applications remained negligible.

Compared to 2021, in 2022, more companies responded that they intend to invest over the next three years. More companies will invest in equipment and machinery, real estate, and business expansion. However, the proportion of companies that intend to invest in energy renovation of buildings has increased significantly. Companies will finance their investments primarily through their own resources and bank loans.

The impact of higher energy costs in 2022 has been significant for companies, with around 80% of companies reporting an increase in energy costs of more than 5%. Of these, about a quarter estimate that they will not be able to cover higher energy costs within a year, and only about half estimate that they will be able to pay higher energy costs in the future. Measures to improve energy efficiency and self-sufficiency have an important impact on business investments in this area, while companies have already increased prices for products and services and reviewed existing contracts with suppliers to be able to account for the rising costs of energy.

Credit conditions

Interest rates for SMEs declined in recent years, from 6% in 2011 to 2.5% in 2020. However, due to the rising inflationary pressure, the interest rates increased in 2021 and 2022. For example, the monthly base interest rate in December 2022 was 0.8% and an annual base interest rate was already 9.84%.

While large enterprises enjoyed overall better credit terms during this period, the decrease of the spread in the last seven years shows that credit conditions for SMEs and large companies are converging, especially due to the government policy programs intended for SME financing.

Government policy response

Besides bank lending, the government of the Republic of Slovenia offered through its implementing institutions other sources of finance. The SID bank, the national development bank, acts as a (1) fund of funds manager for European cohesion funds (ERDF) and managed the EU funds directly or indirectly through the commercial banks or Slovene Enterprise Fund and (2) implemented several loan funds. Additionally, the Slovene Enterprise Fund, acts as a public fund and a financial institution of Ministry of Economy, Tourism and Sports, offering favourable financial resources including grants (for innovative startups, for digital transformation of SMEs, etc.), seed capital, and microloans.

During the energy crisis, both financial institutions played an important role in offering liquidity loans (SEF up to 100.000 EUR and SID bank larger loans).

SLOVENIAN ENTERPRISE FUND

In 2021 and 2022 Slovenian Enterprise Fund tendered favourable financial resources for micro, small and medium-sized companies in the form of:

• micro-credits (for mitigation the consequences of COVID-19 through fund-of-funds, for critical area) crisis liquidity credits, intended for rapid and favourable financing of the final elimination of the consequences of the COVID-19 pandemic and assistance in remediating the consequences of the energy crisis on the economy;

• guarantees for bank loans with an interest rate subsidy, which we make it easier and faster to take out more favourable bank loans;

• seed capital through fund-of-fundsin the form of convertible loans and capital investments;

• grants for innovative start-ups companies, for wood industry, for digitalization and for initial investments in less developed areas;

• and vouchers for obtaining certificates intended to improve the quality of business or products and services.

In the period from 2021-2022, SEF has also run a voucher scheme through which a total of 15 different vouchers were made available to SMEs.

Table 39.3. Approved funds per instrument type 2021 - 2022

Year	2021-2022
Instrument type	Approved funds in EUR million	Number of supported projects
LOANS	87.72	1.196
GUARANTEES	153.58	1.054
GRANTS	37.14	416
Wood industry	2.83	25
Digitalization	29.99	311
Start up incentives	4.32	80

Table 39.4. The effects on supported SMEs

Year	2019 - 2021
Assistance	Jobs preserved	Newly created jobs	Index - change in income	Index - change of average value added per employee
LOANS	35.310	1.217	1.08	1.17
GUARANTEES	26.236	1.774	1.27	1.12
GRANTS	8.348	1.157	1.33	1.16
Wood industry	1438	128	1.38	1.35
Digitalisation	6725	930	1.27	1.31
Start-up incentives	185	99	3.14	1.90

SID BANK

At the end of 2022, net loans of SID Banka totalled EUR 1.69 billion, which is similar to the end of 2021, but with a structural increase in the share of direct financing.

Funding is implemented by established instruments, which get adapted to current needs. It is based on long-term earmarked loans to commercial banks, direct loans to enterprises with or without state aid status (especially under financial engineering instruments), export credits, project finance, debt buy-backs, debt incursions and other forms of risk-taking. Additionally financial instruments by the SID Bank are implemented indirectly through the use of financial intermediaries (Fund of Funds FI 2014-2020, Fund of Funds COVID-19).

As part of its anti-crisis and development activities in 2022, SID Bank concluded 210 direct and indirect financing transactions of financial institutions totalling EUR 394 million. In 2022, loans totalling EUR 447. 4 million were concluded directly and in co-financing with commercial banks and through intermediary banks.

Within the framework of the established loan funds, in 2021-2022 the SID Bank supported:

• 16 companies in the amount of EUR 46. 482.750 under the Programme for co-financing operations and capital consolidation

• 6 companies in the amount of EUR under the SID Bank Programme for financing investments in the forest-wood processing chain,

• 8 companies in the amount of EUR 34.4 million under SID Bank Programme for financing technological development projects

• 2 companies to the tune of EUR 10.7 million under the Bank’s SID Programme for Financing Enterprises for Investment Projects contribute to the transition to a circular economy.

Within the framework of two established funds of funds, financed from European structural and Investment Funds and final recipients receive resources in combination with national funds, in 2021-2022 the SID Bank supported:

• 25 companies in the amount of 4.51 million EUR through equity financing as seed capital,

• 1809 companies in the amount of 100.73 million EU through microloans,

• 1 company in the amount of 1.14 million EUR for financing investments in energy efficiency through loan,

• 169 companies in the amount of 57.82 million EUR through loans with fund of funds’ guarantee for financing investments in research and development,

• 1 company in the amount of 0.6 million EUR for financing investments in urban development and

• 50 companies in the amount of 29.49 million EUR through loans for financing investments in research and development.

In addition to bank lending from commercial banks, and the SID development bank, the government of the Republic of Slovenia has also implemented a range of measures to fill the gaps in SME access to finance and complement other financial measures. These policies include:

• Blended finance for innovative startups (EUR 2.1 million per year for 40 innovative startups). The government provide grants blended with mentoring and training.

• Blended finance for early-stage start-ups. The government provide seed capital in the form of convertible loans and equity capital blended with mentoring and training.

Figure 39.1. Trends in SME and entrepreneurship finance in Slovenia

Source: See Table 39.2.

Statlink

Table 39.5. Sources and definitions of Slovenia Scoreboard

Indicator	Definition	Source
Debt
Outstanding business loans, SMEs	BANK loans to SME companies of the non-financial sector (S.11), stocks	Bank of Slovenia
Outstanding business loans, total	Bank loans to companies of the non-financial sector (S.11), stocks	Bank of Slovenia
Share of SME outstanding loans	..	Bank of Slovenia
New business lending, total	Sum of new bank loans to companies of the non-financial sector (S.11)	Bank of Slovenia
New business lending, SMEs	Sum of new bank loans to SME companies of the non-financial sector (S.11)	Bank of Slovenia
Share of new SME lending	..	Bank of Slovenia
Outstanding short-term loans, SMEs	Short-term bank loans to companies of nonfinancial sector (S.11) with less or equal to 250 employees;	Bank of Slovenia
Outstanding long-term loans, SMEs	Long-term bank loans to companies of nonfinancial sector (S.11) with less or equal to 250 employees	Bank of Slovenia
Share of short-term SME lending	..	Bank of Slovenia
Government loan guarantees, SMEs	..	Ministry of Finance
Non-performing loans, total	Delayed loan repayments over 90 days	Bank of Slovenia
Non-performing loans, SMEs	Delayed loan repayments over 90 days for SMEs	Bank of Slovenia
Interest rate, SMEs	Interest rates for loans to companies of the non-financial sector (S.11) with less or equal to 250 employees	Bank of Slovenia
Interest rate, large firms	Interest rates for loans to companies of the non-financial sector (S.11) with over 250 employees	Bank of Slovenia
Interest rate spread	Calculated difference	..