The issue of social enterprises has always been a complex one for the country. Despite periodically appearing in development programs, this segment is poorly represented. To remedy the situation, various investment funds offer to finance social enterprises.
Financing for social enterprises: review of program conditions
The new social investment program involves lending to enterprises. For regular customers, the loan interest will be quite low. The specifics of this segment are aimed at solving current problems that arise in society. Such organizations need comprehensive support, and one of its options is to provide credit on favorable terms.
The amount of the loan varies from 10 thousand to 100 thousand dollars and is issued in hryvnia equivalent. The loan term is 36 months if the funds are needed to purchase equipment and 24 months if the money is working capital. The interest rate varies from 5 to 10%, which is much less than the banks give for other industries. The latter usually have to pay 24% per annum.
To provide this program for social enterprises, investment funds cooperate with banks. No financial institution can provide a credit rate below 18% without participation of the funds, as the NBU has such an indicator.
The program is possible thanks to a special scheme of interaction between the investment company and the bank. The Fund opens a deposit, but does not take any interest on it. It gives an opportunity to create a liquid stock of finances. Thanks to this partnership, the interest on the loan is reduced and the social enterprise has the opportunity to pay this money to be fully operational.
Receiving such a loan is considered by the bank as in the case of any loan.
Unfortunately, there is no separate legal form for social enterprises in the legislation, so investment funds focus on their criteria for selecting candidates for financial assistance.
To take part in the credit program, entrepreneurs or legal entities must have been engaged in professional activities for at least one year. Their business must be formalized as social.
In addition, the organization must have a clear profit distribution scheme, which will indicate the share of each item of expenditure, including for a specific social task. It is also necessary to provide a description of the enterprise’s activities in the last 6 months and its social orientation.
Three types of organizations are eligible to take part in the programme:
- Enterprises that provide jobs for people from vulnerable groups. Their number should be more than 50% of employees. These include veterans or fighters, people who have been rehabilitated after various types of addiction.
- Enterprises that finance social activities and provide jobs for vulnerable groups.
- Enterprises where at least 20% of profit is spent on solving various social problems.
All of them have the right to receive a loan on favorable terms.