We recently spoke with Mindaugas Mikalajūnas, Cо-Founder and CEO of SME Finance, a Vilnius-based Fintech reinventing growth financing for small and medium enterprises (SMEs) across Europe.
SME Finance aims to fill a gap left by risk-averse banks and high-cost alternative lenders. Led by Mikalajūnas with a team of 100+ professionals, SME Finance leverages proprietary AI and automation technology to deliver fast, unbiased lending decisions within hours versus months.
Initially focused on the Baltics, SME Finance has the goal of becoming a pan-European fintech company and in recent years has expanded steadily across Europe and now operates in 5 countries. It recently forged a €40 million financing partnership with the European Investment Fund to expand access to capital for SMEs.
With in-depth experience across banking and fintech, Mikalajūnas provides unique perspectives on the evolving SME lending landscape, the role of alternative data-driven models in promoting financial inclusion, and the roadmap for SME Finance as it continues enabling growth for European SMEs.
Mindaugas Mikalajūnas is CEO of SME Finance, a European fintech that has already provided more than €1 billion in working capital to over 2,000 growing businesses across Europe. This level of success is a result of providing a faster, fairer alternative to the SME financing offered by traditional banks and VC equity funding, even for companies with short trading histories.
Mikalajūnas is an experienced fintech and banking executive, with 13 years at one of the biggest Scandinavian banks. In his banking career he was frustrated with the lack of opportunities afforded by the major institutions to SMEs, the backbone of modern economies, accounting for over 99% of businesses in the EU and over 50% of European GDP. He co-founded SME Finance to provide growing businesses with a single platform for all their finance and daily banking needs. Loan decisions are delivered through an AI-driven financing platform, which makes accurate, unprejudiced lending decisions within just one hour.
Inadequate cash flow financing is the cause of 82% of business failures, according to data from the USA. By widening access to lending, Mikalajūnas and the SME Finance team are helping European companies grow more rapidly with appropriate working capital, and tailor-made factoring, loans, and leasing packages.
Mikalajūnas ascribes SME’s rapid growth to a clearer, more objective and more professional approach to risk in the SME sector compared with the major banks, and a considerable amount of hard work. He says the company made its major breakthrough during the COVID crisis, when the majors imposed even tighter restrictions on their SME customers. SME Finance’s objectivity and strong customer relationships enabled it to expand even faster during this period.
Our conversation with Mikalajūnas is shared below.
Crowdfund Insider: Can you provide a brief overview of SME Finance and its journey since its inception in 2016?
Mindaugas Mikalajūnas: I’d be delighted. SME Finance was founded in Lithuania with the mission to transform and modernise growth financing for small and medium enterprises (SMEs) across Europe. Since 2016, our proprietary AI-driven platform has provided over €1.5 billion in working capital financing to more than 3000 SMEs, facilitating business growth and resilience.
Initially focused on the Baltics, we have steadily expanded our footprint across Europe, now operating in 5 countries, including the Netherlands, Finland, and the Baltics. This geographic diversification has been strategic, enabling us to balance exposures and tap growth opportunities as economic cycles vary across regions.
SME Finance is about innovation in service delivery. Our technology and data-driven approach to credit assessment delivers quick, fair lending decisions within hours by analysing real-time financial health. This is resonating deeply with SMEs accustomed to long wait times, piles of paperwork, and rejections from traditional banks.
2022 marked a milestone year for us. We launched the AI-powered financial technology platform, smeGo. This cutting-edge platform is not only a testament to our commitment to innovation but also a crucial part of our strategy to deliver rapid lending decisions, ensuring that we tailor the most optimal financing solutions for SMEs.
In a collaborative stride with our partners, we’ve also pioneered an innovative pre-scoring lending model in the Baltics. This model enhances our credit assessment capabilities, ensuring that we don’t just provide funding, but we provide it smarter, faster, and with a keen understanding of the unique needs and conditions faced by SMEs.
Crowdfund Insider: SMEs are described as the backbone of the European economy. What unique challenges do they face today in accessing finance?
Mindaugas Mikalajūnas: You’re absolutely right. SMEs are the engine of Europe’s economy, constituting 99% of businesses and a majority of employment. However, they frequently struggle with limited access to growth capital due to various factors.
Firstly, traditional lenders view SMEs as higher risk propositions compared to large corporates. Conventional banks demand extensive paperwork, guarantees, and a months-long review process before approving a loan. Many SMEs simply lack the scale of operations and hard collateral preferred by conventional banks.
Secondly, smaller loan sizes make SME lending unappealing for banks from a profitability standpoint. Higher due diligence costs also deter banks.
Lastly, legacy credit assessment models rely heavily on past financial statements and balance sheet size versus evaluating real-time business performance and cash flows. This puts newer SMEs at a disadvantage.
COVID-19 and now the 2023 slowdown have exacerbated these issues, with banks taking an even more cautious stance. Fintech lenders like SME Finance fill this market gap.
Crowdfund Insider: What technology innovations at SME Finance enable faster credit decisioning and financing access for SMEs compared to traditional models?
Mindaugas Mikalajūnas: Our proprietary platform integrates automation, data connectivity, and analytics to deliver efficient and risk-calibrated lending to SMEs.
At SME Finance, we’re leveraging technology to redefine the lending landscape for SMEs. By automating much of the underwriting process and reducing the dependency on external data procurement, we’ve slashed the time it takes to reach a lending decision. With our AI-driven financing platform, SME Finance is capable of delivering accurate, unbiased lending decisions in as little as one hour.
The journey begins when an SME reaches out to us. Through API integrations and open banking, we connect with our partners to access data points from the applicant’s accounting software, bank records, and other relevant channels. We’ve streamlined the process to minimise the need for extra information. For certain products, like revenue-based financing, the lending decisions are made without any additional information requirement.
What sets us apart is that our platform employs advanced machine learning models, enabling us to make unbiased, more tailored, and flexible credit decisions based on business needs. This approach allows us to structure financing terms that are precisely tailored to an SME’s profile and needs.
Rather than relying on aging balance sheets, we assess current financial health. Our automated underwriting reduces paperwork and the need for external data procurement. This is how we can deliver loan decisions within hours versus months for SMEs.
Crowdfund Insider: How do partnerships like the recent one with the European Investment Fund expand SME Finance’s capabilities?
Mindaugas Mikalajūnas: Partnerships are crucial to our mission of empowering SMEs with fast, flexible capital across Europe.
Our recent €40 million financing agreement with the European Investment Fund is a great example. This facility will expand lending in selected regions. This partnership is mainly focused on broadening the financing opportunities for businesses investing into sustainable projects, innovation, and digitalisation. That means this kind of partnership helps SMEs to invest into modern technologies, and sustainable solutions. Also, this one agreement focuses on micro-companies too.
Such collaborations allow us to scale our balance sheet and reach more SMEs in need of growth capital. Our presence across Europe, combined with partners’ regional insights, help us better understand and serve local SME needs.
We are actively exploring more co-financing programmes. Embedding our solutions into B2B ecosystems through open APIs can also accelerate access to capital for SMEs operating on those platforms.
Crowdfund Insider: With looming recessionary pressures, what steps can SME lenders take to sustain access while also safeguarding loan portfolios?
Mindaugas Mikalajūnas: These are undoubtedly turbulent times. As an SME lender, we have a responsibility to ensure sustainable growth through prudent risk management.
I see early warning monitoring, adaptable products, and prudent funding as key pillars. Granular data analytics help detect emerging risks across markets so we can adjust quickly. Adapting loan tenures, pricing, and sizing in response to sectoral and regional risk outlooks is important.
Diversifying our funding sources and capital base provides stability when market volatility strikes. Communicating proactively with SMEs on changing dynamics also maintains trust.
While risks are rising, demand remains robust as SMEs need financing to weather downturns. SME lenders who take decisive actions today and stay closely engaged with SMEs will emerge stronger.
Crowdfund Insider: Looking ahead, what are your strategic priorities for SME Finance to continue enabling SME growth?
Mindaugas Mikalajūnas: Our core priority is scaling our platform across Europe to empower many more SMEs with fast, flexible funding. Expanding our presence to new markets every year while deepening penetration in current regions is crucial.
Secondly, we are embedding our financing solutions into B2B ecosystems via APIs to make capital access more seamless for SMEs when transacting.
Investing further in risk analytics using automation and AI will also allow us to make smarter lending decisions as the economy evolves.
However, tech-enablement is only half the story. Providing a stellar customer experience through transparent digital processes remains central to our strategy. SMEs value speed, convenience and fairness.
By pursuing these priorities in collaboration with our partners, we are confident of sustainably expanding access to growth capital for European SMEs.