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Banks extend helping hand to small fry

Small and medium enterprises have been thrown a cash lifeline by the Slovak Guaranty and Development Bank (SZRB). A new loan programme, announced by the bank in September, will pump 50 million deutschmarks into the sector, and development agencies are already hailing it as a boon to Slovakia's capital-starved businesses.
"I think it will be very useful," said Darina Kalužníková, director of financial support programmes at the National Agency for Development of Small and Medium Enterprises. "It will attract a lot of interest because of the lack of capital resources in the country."

Small and medium enterprises have been thrown a cash lifeline by the Slovak Guaranty and Development Bank (SZRB). A new loan programme, announced by the bank in September, will pump 50 million deutschmarks into the sector, and development agencies are already hailing it as a boon to Slovakia's capital-starved businesses.

"I think it will be very useful," said Darina Kalužníková, director of financial support programmes at the National Agency for Development of Small and Medium Enterprises. "It will attract a lot of interest because of the lack of capital resources in the country."

The programme is designed to provide investment and operational loans for small and medium-sized enterprises with up to 500 employees. Financing is being provided by the German bank Kreditanstalt fur Wiederaufbau.

According to Gabriela Sedláková, SZRB general director, the bank has already signed preliminary contracts with those commercial banks that are cooperating on the SZRB programme. Poštová banka, Istrobanka, Priemyselná banka and Poĺnobanka were all named as participants.

Boris Kupkovíč, head of commercial loans at Poľnobanka, said that "currently the programme is still in the preparation pahase at commercial banks, and we expect it to really kick off from October."

The SZRB scheme is one of the few chances that small and medium-sized enterprises have of obtaining long-term financing with maturity of up to ten years. One of the conditions for granting the loan is that the share of the enterprise owned by the state, banks or local self-government must not exceed 25% of total assets. At the same time, the share of foreign capital in the firm cannot exceed 49%.

According to Sedláková, a single enterprise may qualify for a maximum loan of 3 million deutschmarks (approx. 60 million Sk) at a 13.5% rate of interest. The bank rerserves the right to modify the interest rate up to 2% to adjust for risk caused by extreme fluctuations in exchange rates.

Another condition of the scheme is that the borrower cover at least 25% of the projected investment with his own capital, as the loan amount can only represent 75% of the total investment. Kupkovič explained that "this 25% can come partly from another source - another loan or any other kind of financing - but at least part of it should come from the company's own pockets."

Kalužníková stressed that the terms of the scheme were generous, adding that "foreign sources are already exhausted, and only revolving capital remains for loans. That's why this programme, with its fresh capital, will be vital."

Sedláková maintained that the programme is not intended for everyone, and excluded agricultural enterprises with primary production, mining companies, as well as enterprises involved in shady or speculative financial transactions and activities. "It should carry the features of a supporting loan programme," Sedláková said.

Firms interested in the programme will have to apply for a loan at one of the commercial banks that are working with SZRB. "The individual projects will be examined by the commercial banks and passed over to the SZRB, which will make the final decision about granting the loan," said Kupkovič. He added that the commercial banks serve as mediators between the client and the granting body, and carry full responsibility for the security of the loan.

Applicants can be supervised under the auspices of SZRB and Kreditanstalt fur Wiederaufbau during the entire period of the loan-based relationship.

With the new programme, SZRB becomes the first bank in central Europe to provide such a service. SZRB's 1997 fiscal year ended with 320.8 million Sk ($ 9.2 million) in taxable profit. Last year's balance amount topped 4.2 billion Sk ($ 120.2 million), which was a 647 million Sk ($18.5 million) increase over 1996. Out of the mentioned resources, 205.2 million Sk ($ 5.9 million) was to restock guarantee and contribution funds and 200 million Sk ($ 5.7 million) for the loan-support programme. The bank's fixed assets grew to 600 million Sk ($ 17.1 million), from 500 million Sk ($ 14.3 million) last year.

Material for this story was also taken from the Slovak business weekly Profit

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