Dictionary of terms

A credit guarantee is the LGA commitment to a commercial bank to compensate for its losses in the case, where the merchant does not repay the bank loan.

The amount of the guarantee is the total amount of the LGA credit guarantee commitment, up to which a commercial bank is compensated for covering its losses.

A credit guarantee premium is the premium payment that is paid to the LGA for the credit guarantee issued one a year for the following year.

The deferred payment term for export credit is that time period, when the buyer has to settle up for the received goods or services.

An export guarantee is the LGA commitment meet the losses of a merchant (or those of their financing commercial bank) in the case, if the foreign buyer of the merchant’s exported goods or services has not made payments in the specified term.

The amount of the export guarantee is the total amount of the LGA export credit guarantee commitment, up to which the merchant (or their financing commercial bank) is paid out as compensation for covering their losses.

The export guarantee period is the time period, for which the LGA assumes a commitment for the export credit guarantee for the performance of the delivery of goods and services by the Merchant. For export transactions with permanent deliveries the export guarantee term s one year, with the possibility to extend it at the end of the term.

A mezzanine loan is a long-term loan issued by the LGA, which is subordinated in relation to the loan issued by the bank and is enhanced with a lower level of security than a bank loan.

Risk capital is long-term investment into an enterprise’s unlisted equity or provision of equity related loan with the purpose of supporting its rapid growth and development. Risk capital investment can be attracted at any stage of enterprise development. If you have great business idea, but lack necessary financial resources to execute it, and also lack necessary collateral to attract debt financing, you can try risk capital. If you own successful enterprise, but high debt/equity ratio prohibits attracting additional debt finance, risk capital can be solution here as well. More extensive explanation on risk capital can be found here http://www.lvca.lv/en/what-is-risk-capital

A Structural Fund is a financial instrument established by the European Union, which supports several measures, amongst those there are also financial support services provided by the LGA, for decreasing the differences in the development levels of different regions, ensuring long-term financing.

A subsidy equivalent is the benefit gained by the merchant from the support provided by the LGA calculated in money terms. In the case of a credit guarantee it is the difference between the LGA guarantee premium rate and the rate, which would be applied after the principles of commercial markets. Similarly in the case of a mezzanine loan it is the difference between the LGA mezzanine loan interest rate and the rate, that this loan might get on the private market.

The term of a credit guarantee is that time period, when the merchant does not repay a bank loan; the LGA compensates the commercial banks’ losses. Normally the credit guarantee term coincides with that of the final payment term of the bank.