At the beginning of the quarantine SUP suggested that the authorities extend the 5-7-9% loan program for small and medium business to support it during the crisis, and the Union’s proposal is implemented!
We approve the Government’s decision to adapt the program to the urgent needs of Ukrainian business thus contributing to faster economic stabilization and job retention in the country.
In its turn, SUP conducted a business survey on expectations from a 5-7-9% lending program (91% of respondents are owners of small and medium-sized enterprises) to find out what lending conditions they will surely be able to execute and how this program could help. The survey was attended by members of the SUP and members of the united COVID-19 Business Community.
Did the proposals of the entrepreneurs coincide with the extended program presented by the government?
New program conditions:
The company founded by a resident of Ukraine can get a loan. The level of annual income is up to 100 million UAH (increased, it was 50 million UAH), regardless of the number of employees in the enterprise (in the previous program there were up to 50 people). In fact a micro-entrepreneur, a small and medium-sized business can fulfill the conditions of a loan.
These funds can be used by entrepreneurs to increase production, investment projects related to preventing the spread of COVID-19, introduction of innovations, the acquisition of non-residential real estate or objects of intellectual property rights related to the implementation of the investment project. Most importantly, these funds can be used to finance the payment of wages or rent, but only at the rate of 25% of the loan granted for a period of only up to 2 years. They are applicable only to credits for the prevention and distribution, localization and elimination of COVID-19 outbreaks.
The program is valid for 5 years. The maximum loan amount of this program increased from 1.5 million UAH to 3 million UAH.
Also manufacturers of medicines, medical equipment or medical products (only them) can receive a loan at a rate of 3% under this program!
Besides such changes are important for business:
- banks may extend the loan of the program for up to 6 months and the term of the delay for the loan for the production of medicines – up to 9 months. As for the refinancing loan for existing business debt – until December 31, 2020.
- The program is also extended to lending to refinance existing business debts with Ukrainian banks.
The conditions for obtaining such a loan are:
– retain jobs – at least 60% of the payroll fund and 80% of the number of staff compared to the state of the enterprise on March 1, 2020;
– the amount of annual income from business activities is no more than € 10 million;
– no inactive loans.
In case of refinancing (loan for repayment of loans from other banks) the loan rate is set at 0%.
What did the business expect?
We certainly conducted a survey among small and medium-sized entrepreneurs (91% of all respondents) to understand what credit conditions they would be able to fulfill exactly and how this program could help.
According to the results of the survey today 75% of respondents have not applied for a loan under the 5-7-9 program. At the same time, half of those entrepreneurs who applied were refused.
Quarantine affected two-thirds of all businesses (small and medium-sized entrepreneurs in particular) and 95.3% of respondents need available credits.
Positive decisions about business expectations:
- 90.6% are satisfied with the current loan program the maximum term of which is 5 years;
- 71.4% are satisfied with the increased loan amount up to 3 million UAH;
– revised restrictions on the use of funds and annual income (increased to 100 million UAH) were an obstacle in obtaining loan for 65.6%, and therefore the number of requests under this program will be higher.
At the same time
- 29.6% of respondents need more financial assistance than the amount specified in the program of 3 million UAH;
- 31% of the respondents cannot satisfy the condition “having a profitability of business for the last 12 months”;
- more than 50% are not able to satisfy the conditions of the bank mortgage.
The changes adopted by the Government are positive but they need further improvement, that is:
- cancellation of the criterion of profitability for a certain period for a certain range of industries (this is related to the specificity of production – growing berries (some bear fruit in the third year), animal husbandry);
- the most important for business now is to save jobs. In order them to be able to direct these funds to pay salaries it is necessary to increase the term of the loan for such purposes from two years to the term of the loan (5 years) and to increase the share to 50% of the loan. Such funds can be used to pay employees’ salaries, rent and utilities payments, taxes, fees.
- expanding the ability to use credit to replenish working capital for all loans (currently only for loans issued to prevent the spread of COVID-19 and overcome its effects);
- increase of the maximum loan amount from 3 to 5 million UAH depending on the number of employees and taxes paid in the previous periods;
- introduction of public statistics on credits and refusals granted.
