Tuesday, July 23

How to develop the domestic segment of SME: financing options

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Where to get the money to invest in the SME segment: overview of lending programmes

The main factor that impedes the development of small and medium-sized businesses is the lack of capital. Private entrepreneurs go a difficult way in the beginning to create their own business and stay in the market – most of them simply do not have enough money. There are various options where the SME segment can get the right financing.
A common way to find money is to go to a bank. Many institutions now have lending programs for small and medium businesses. Banks offer entrepreneurs:

  • loans for capital acquisitions;
  • refinancing options for loans from other financial institutions;
  • credit on deposit;
  • overdraft, including pledge.

For business in the agricultural industry there is a service of avaliating bills of exchange. Most banks offer a loan to purchase equipment for up to 5 years, but in some cases you can find programs with 7 years. The rate varies between 17-19%. If you use the option of cooperation with the manufacturer of equipment, you can get a loan at 10% per annum.
But banking services are not the only solution for the SME segment. In Ukraine there are 20 programs for the development of entrepreneurial activity, where the partners are international companies. Major donors from other countries are ready to lend business through partner banks. The program is designed for 3-5 years and allows to modernize an existing enterprise, to start a new project from scratch. Innovative solutions related to ecology and energy efficiency are supported. IT-startups and biotechnology-related projects are popular areas for cooperation with foreign partners. In addition, it finances businesses that are willing to contribute 10% of their profits to solving social problems or where 50% of employees belong to socially vulnerable groups.

The state also promotes the development of the SME segment. This year the budget allocated 72 million UAH to finance private entrepreneurs. The programme of support for farmers and cooperatives has funds in the amount of 1 billion UAH, which will be allocated for small and medium businesses in the agricultural sector.
Another option is a loan from a credit union or from financial companies that provide such a service.
Sometimes the most optimal option is P2P and P2B lending. In this case the funds for the entrepreneur come from the investor and all cooperation is direct. To use the service, it is necessary to place an application on a special Internet platform.
This type of financing is quite convenient for small and medium businesses, as it eliminates the need to provide a large package of documents and various bureaucratic procedures.
Crowdfunding became known in the country recently, but is already gaining momentum. Its essence is to raise funds to develop a startup, where investors are individuals. Applications are placed on the Internet, and anyone can join the funding of a project they like.

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