The
EBRD and SME financing
Source:
EBRD – March 2003
Many projects are too small to be funded directly by the EBRD. To give entrepreneurs and small firms greater access to finance, the EBRD supports financial intermediaries, such as local commercial banks, micro-business banks, equity funds and leasing facilities.
Investment criteria are consistent with EBRD policy, but financial intermediaries make independent decisions about which small and medium exterprises (SMEs) they fund.
sme loan finance
Many projects are too small to be financed directly by the EBRD. Instead, the EBRD supports local commercial banks, which in turn provide loans to SMEs. Tools used include credit lines, bank-to-bank loans, standby credit facilities and equity investments in the local banks.
applying for a loan
Contact local banks directly to access finance, to check local requirements and investment limits. Please see separate documents for contact details of the local banks and micro-business banks.
Loans over €10,000
Contact local banks (see separate document)
Loans €50 - €10,000
Contact micro-business banks (see separate document)
does your project qualify?
sme
funding requirements
The EBRD’s financial intermediaries consider sound and sensible projects that support private sector development. Each bank or programme has its own requirements and investment limits. For detailed financing information, contact the intermediary directly.
requirements
for obtaining loans from local banks
· Sound business plans for establishing or expanding a company’s business.
· Solid management with a proven track record.
· Products that are competitive in the marketplace.
· Information on owners/partners.
· Financial history.
· Security in the form of pledges, mortgages, etc.
· Funds provided must be used in strict accordance with the aims stated in the original business plan.
· In line with the EBRD’s mandate, banks ensure that all proposals pay due regard to environmental issues.
· Funding cannot be provided to majority state-owned companies or for government-guaranteed projects.
· In addition, equity contributions, either in existing or new business, of around 35% are often required.
sme
leasing finance
Financial and operating leases for small businesses are available from EBRD-supported leasing facilities. They cover a range of goods such as commercial vehicles, equipment and machinery.
Improving health care: leasing finance for medical equipment through DVI.
Contact local leasing companies to access finance and to check specific requirements.
The EBRD has an equity investment in Uzbek Leasing International AO. This leasing company is also supported by Maybank, the largest bank in Malaysia. It specialises in finance leases for SMEs in Uzbekistan. The focus is on companies with export earnings but others with strong cash flow are considered.
Uzbek Leasing International AO
Ul. Turab Tula, 6th Floor
700003 Tashkent, Uzbekistan
Contacts: Mr Bakhodir G Yuldashev, Chief Executive Manager
Mr Ibrahim Sahari, Deputy Chief Executive Manager/Technical Manager
Tel: +998 71 239 1654/245 5556
Fax: +998 71 120 6729
Email: uzlease@ishonch.uz
equity funds
Equity finance is available from EBRD-supported private equity funds, donor-supported equity funds and directly from the EBRD. Equity funds support all kinds of investments including business start-ups, expansion and acquisitions. Some funds specialise in financing companies in need of restructuring, in distressed situations or mezzanine capital for a later stage. Fund investments generally have a higher prospective return and require longer-term risk capital than standard EBRD projects.
Investment criteria are consistent with EBRD policy, but investment decisions are made by fund managers.
ebrd
supported equity funds
Contact fund managers to access finance, to check specific fund requirements and investment limits. See separate documents for information about each fund along with contact details.
ebrd
direct investment
Equity finance up to US$ 2.5 million for businesses lead by experienced local entrepreneurs is available directly from the EBRD through the EBRD Direct Investment Facility.
The EBRD's Direct Investment Facility (DIF) demonstrates the viability of smaller businesses based in countries and regions at an early stage in the transition to the market economy. Equity and limited debt financing are available to attractive private sector businesses, especially those led by motivated and experienced local entrepreneurs. Investments may be in existing enterprises proposing to expand their businesses or product lines, or start-ups with an unusually strong business plan and sponsors with relevant business experience.
Local equity participation is strongly preferred. Foreign strategic investors or sponsors are not required, although they are eligible for investment. Businesses do not have to generate hard currency earnings, although these are obviously welcome. Sponsors may contribute capital at least partially in kind, but are expected to make reasonable cash contributions as well.
Investment range
· Generally US$ 500,000-US$ 2.5 million.
· Equity share target range is 25-30% but up to 49% in the short term.
· Preferred investment span is 3-5 years, but up to 7 years is possible.
Project requirements
· Significant growth potential with relatively modest capital investment
· Experienced sponsors and management with a proven track record
· Sound financial basis and well-structured financing plans
· Well-developed and specific business plans
· Clear programme for project implementation within a relatively short time span
· Strong competitive prospects in relevant local/regional markets
· Understanding of equity investment and independent valuation
· Realistic exit strategy
· Prospective investment returns of at least 20% compounded annually over the investment period
· No need for restructuring or for significant technical assistance
· No involvement in high-risk environmental activities
· No unresolved post-privatisation issues
· Limited exposure to local government policy
· Simple and cost-effective investment structure
Eligible countries
Albania
Armenia
Azerbaijan
Belarus
Bosnia Herzegovina
Bulgaria
FYR Macedonia
Georgia
Kazakhstan
Kyrgyzstan
Moldova
Russia (excluding Moscow and St. Petersburg)
Serbia and Montenegro
Tajikistan
Turkmenistan
Ukraine (excluding Kiev)
Uzbekistan
eu-ebrd sme finance facility
In April 1999, the EBRD and the European Commission launched the SME Finance Facility for micro, small and medium-sized enterprises operating in the EU Accession Countries of central and eastern Europe: Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia.
The SME Finance Facility channels €710 million (600 EBRD/110 EU) to SMEs through loans to local banks and investments in private equity funds. The facility also provides leasing finance.
The local banks focus on lending to SMEs at the lower end of the size spectrum. The average loan to participating banks is normally between €5 million and €15 million. The sub-loans extended by banks is normally for small enterprises with up to 100 employees (€30,000 to €100,000) and micro enterprises with less than 20 employees (up to € 30,000).
Banks are selected on the basis of their financial strength, branch network, knowledge of their clients and, most importantly, their commitment to engage in sustanined SME lending.
The EU grant covers performance fees, which compensates the Banks for start-up costs related to SME onlending. The grant also funds technical assistance asimed at
Recruiting and training of bank staff in small loan appraisal, supervision and administration
Improving information systems
Strengthening management capabilities such as marketing and SME client relationship management
The equity funds range between €12 and €20 million, and maximum financing per investee is restricted to €1 million for a minority stake. The funds are managed by independent fund managers who are responsible for raising private capital.
The EU contribution is structured to provide incentives to overcome the private sector's reticence about SME investment and to allow the Facility to attract competent fund managers.
The funds use the full range of equity and quasi-equity instruments and normally hold minority positions (10 - 49%). They do, however, secure rights enabling them to exercise corporate governance over the SME portfolio.