Financing SMEs and Entrepreneurs 2026: Estonia
Table of contents
In 2023, Estonian SMEs employed 83% of the workforce and accounted for 79% of total value added. Micro-enterprises, defined as firms with fewer than 10 employees, made up 95% of all enterprises, employing 41% of the workforce and contributing 31% of the total value added.
SME interest rates rose from 4.08% in 2022 to 6.76% in 2023 and 6.92% in 2024, which in part explains a relatively modest demand for credit. Interest rates for large firms peaked at 6.49% in 2023, declining to 6.03% in 2024. The interest rate spread between SMEs and large firms widened to 0.9 percentage points in 2024, tripling compared to the previous year.
Despite the increase in SME interest rates, new SME lending reached EUR 2.46 billion in 2024, up EUR 67 million from the previous year. This increase ended a two-year decline. Nevertheless, SMEs accounted for only 23% of the total new business lending, a figure that has steadily fallen since 2019.
In 2024, outstanding business loans to Estonian SMEs totalled EUR 1.79 billion, continuing a gradual upward trend that began in 2019. However, the SME share of total outstanding loans declined to 17.1%, extending a downward trajectory observed since 2021.
Venture and growth capital rose steadily until peaking at EUR 1.35 billion in 2022 but has since declined significantly – falling to EUR 451.6 million in 2023 (a 67.4% decrease) and to EUR 332.8 million in 2024 (a further 26.3% decrease year-on-year). The decline in venture and growth capital has coincided with the rise of interest rates and geopolitical uncertainty.
Leasing and hire purchase turnover remained relatively stable, fluctuating within a ± EUR 50 million range over the past seven years, except for the 2020 COVID-era. It may indicate that consumer demand is consistent; however, growth might be constrained by lending conditions. Leasing and hire purchases increased by EUR 7 million in 2024 compared to 2023, reaching a total of EUR 769 million.
In 2024, Estonia’s GDP fell by 0.3%. The strongest positive contributions came from agriculture, accommodation and catering, information and communication, and real estate activities. Several other industries provided modest support. In contrast, construction, administrative and support services, and other service activities made the most significant negative contributions.
Private consumption declined by 0.4% in 2024, whereas general government consumption grew by 0.3%. Despite the decline, private consumption ended the year on a positive note, while investments fell by -6.9%, reversing a 7.5% growth recorded in 2023. Exports dropped by -1.2% compared to the previous year, while imports increased by 0.4%. As a result, Estonia’s trade deficit reached EUR 3.3 billion in 2024.
SMEs are a cornerstone of the Estonian economy, as they make up 99.9% of all registered companies. In 2024, SMEs employed 81% of the private sector workforce, accounted for 81% of total value added and for 80% of exports. Micro-enterprises alone, comprising 95% of all firms, employed 39% of workforce and generated 32% of total value added. Between 2023 and 2024. Total number of SMEs grew 2.6% in same period.
In 2024, outstanding business loans to Estonian SMEs totaled EUR 1.79 billion, continuing a gradual upward trend that began in 2019. However, the SME share of total outstanding loans declined to 17.1%, extending a downward trajectory observed since 2021.
New SME lending reached EUR 2.46 billion in 2024, up EUR 67 million from the previous year. This increase ended a two-year decline. Nevertheless, SMEs accounted for only 23% of the total new business lending, a figure that has steadily fallen since 2019 when the share stood at 36%.
Short-term SME loans rose to EUR 211 million in 2024, an increase of EUR 19 million year-over-year. Long-term SME loans also continued their gradual rise, reaching EUR 1.578 billion. The share of short-term loans within total SME lending dropped to 11.8%, down from the 16-19% range observed in earlier years.
Government loan guarantees to SMEs increased significantly in 2024, rising from EUR 68.37 million to EUR 91.3 million – an annual growth of 33.5%. Despite this increase, the total remains below the 2022 level of EUR 100 million. Government-guaranteed SME loans reached EUR 144.67 million, up EUR 32 million from the previous year. In contrast, direct government loans to SMEs have continued to decline since 2020, falling to EUR 4.04 million in 2024.
Non-performing SME loans remain low by historical standards. In 2024, they accounted for 1.05% of all SME loans, a marked improvement from the 2-3% range typical between 2013-2019.
Interest rates for SMEs have been increasing since 2021, reaching 6.92% in 2024, reflecting an increase of 0.16 percentage points compared to 2023, and 2.84 percentage points compared to 2022. The interest rates spread between large firms and SMEs stood at 0.9 percentage points in 2024, the highest since 2021, though slightly below levels observed during 2018 and 2021.
Despite this tightening, survey-based indicators offer a more nuanced picture. According to the Estonian Institute for Economic Research, just 2.25% of manufacturing firms identified access to finance as a significant constraint on growth in 2024, unchanged from 2023 and down from 4.5% in 2022.
Meanwhile, deposits held by non-financial companies increased by 1.36% year-on-year, averaging EUR 15.1 billion per quarter in 2024, equivalent to 38.3% of GDP. Which is 6 percentage points higher than it was in 2022.
The deterioration of the economic outlook and the rapid increase in interest rates have had an impact on corporate financing in 2024. Uncertain economic outlook has reduced both companies loan demand as well as probably influenced lenders' risk assessments when issuing loans. Following the end of a prolonged low-interest-rate environment, elevated rates in recent years have made both borrowing and raising equity significantly more expensive.
In 2024, venture capital investments in Estonia amounted to EUR 332.8 million, a significant decline from EUR 1.38 billion in 2022. This corresponds to a -67.4% decline in 2023, and a further -26.3% decline in 2024. Despite a relatively modest domestic venture capital supply, Estonia boasts one of the highest rates of unicorns per capita, reflecting a strong capacity to secure funding from international investors. While the average investment size remained stable at EUR 5.7 million in both 2023 and 2024, the total investment volume and the number of investment transactions decreased, from 74 deals in 2023 to 57 in 2024.
Leasing and factoring continue to serve as important financing sources for Estonian companies. Leasing and hire purchase volumes, which dropped to EUR 545 million in 2020 due to the COVID-19 pandemic, rebounded to EUR 769 million in 2024, a modest increase of EUR 7 million compared to 2023. In contrast, factoring and invoicing volumes have been declining, falling from EUR 3.76 billion in 2022 to EUR 2.5 billion in 2024, returning to levels last seen in 2020 after a period of growth.
According to the Estonian Tax and Customs Board, 19 421 companies had a tax debt at the end of 2024, totalling approximately EUR 342 million. This figure remained largely unchanged from the end of 2023, when 19 830 companies had a tax debt, representing roughly 12.7% of all economically active enterprises. It is higher than in 2021, when 14 592 companies had a tax debt.
In 2024, 157 companies were declared bankrupt, 18 more than in 2023 and 59 more than in 2022. Despite this recent increase, annual bankruptcies remain significantly lower than during the 2011-2020 period, when 300 to 600 companies went bankrupt each year. The sectors most affected in 2024 were manufacturing, construction, and wholesale and retail trade.
The bankruptcy growth rate among SMEs declined to 12.95% in 2024, down from 42.8% in 2023. In 2023, the average delay in B2B payments was 5.9 days, compared to 6.4 days in 2019 (the most recent comparable year). This marks an improvement and places the current delay below the average levels observed during the 2007 to 2015 period.
In 2024, Enterprise Estonia (EIS) launched a business establishment grant scheme to support individuals in starting their own companies. The measure offers up to EUR 20 000 in funding per startup, requiring a 20% co-financing from the applicant. It targets micro-enterprises that are less than three years old, with fewer than 10 employees and annual turnover under EUR 40 000. Applicants must go through a pre-evaluation process managed by regional development centres. The aim is to boost sustainable revenue growth, employment, and innovation in the early stages of entrepreneurship. By early 2025, over 200 projects had already received funding, with the full EUR 5 million budget allocated. The scheme reinforces EIS’s strategic goal of fostering a dynamic and competitive startup ecosystem.
In 2024, EIS reopened the Digital Roadmap Support Scheme, which provided expert services to 146 companies. The purpose was to assess their digital maturity, identify bottlenecks and growth opportunities, and create a step-by-step plan for future digitalisation efforts. The roadmap serves as a preparatory phase for subsequent digital investments.
Building on the roadmap process, nearly 100 companies received funding under the Digital Transformation Investment Support scheme, totalling around EUR 17 million. This measure helps businesses implement digital technologies, upgrade systems, and boost productivity by funding specific investments based on the previously developed roadmap.
A new support measure was launched in 2024 to promote the Real-Time Economy. With a budget of EUR 1.9 million, this scheme focused on developing software solutions that enable data-based automated reporting to the government. The goal is to reduce the administrative burden for businesses and enhance efficiency through real-time data exchange.
In partnership with the Estonian Information System Authority (RIA), EIS completed a pilot cybersecurity support scheme targeting small and medium-sized enterprises (SMEs). A total of 81 SMEs received external expert assistance to assess and improve their IT systems' cybersecurity. The scheme had a total budget of EUR 865,000 and proved successful, prompting plans for continuation to improve the resilience of Estonian businesses against cyber threats.
To strengthen Estonia’s international competitiveness and address labour shortages in key sectors, EIS expanded its services in 2024 to attract and integrate international talent. Outreach visits to universities reached 1,407 foreign students, informing them about career opportunities in Estonia. A new service was introduced, allowing companies to host a representative from the International House of Estonia, who provides tailored guidance to foreign employees about adapting to life in Estonia. Additionally, cultural integration was supported through webinars and language cafés that offered Estonian language practice. These activities enhance the retention and social integration of skilled foreign professionals, especially in the ICT and engineering sectors.
In 2024, EIS launched a Loan Portfolio Guarantee scheme aimed at improving access to finance for micro and small enterprises. The measure enables banks and other financial intermediaries to offer loans on more favourable terms, such as reduced collateral requirements or lower interest rates, by partially covering the lender's risk. The scheme is designed to support businesses that often face difficulties obtaining credit due to their size or lack of financial history. By enhancing financing conditions, this guarantee helps stimulate growth and investment in the Estonian SME sector.
Source: See Table 2
References
Bank of Estonia, database, June 2025, available at: https://www.eestipank.ee/en
Estonian Institute of Economic Research database, June 2025, available at: - Maksu- ja Tolliameti veebileht
Statistics Estonia, June 2025, available at: https://www.stat.ee/en
Estonian Tax and Customs Board, June 2025, available at: https://www.emta.ee/en
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