In search of capital
Small and medium sized companies are becoming more and more attractive to the banking sector as potential borrowers.
"Many of these companies have good financial results, are growing dynamically and have interesting projects. They have a good economic position and need resources for external financing," the President of the Polish Bank Association (ZBP) Krzysztof Pietraszkiewicz said, though he also admitted that many banks view larger companies as less risky and more reliable.
Director of MultiBank's business product department, Agata Gauer-Sosnowska, agrees that in many cases smaller companies do not have the resources to secure the loans. However, she adds that there are certain funds which specialize in guaranteeing loans for micro-firms (companies with fewer than 10 employees). Apart from that, the borrower's assets, such as real estate, vehicles or machines, could be used as collateral to minimize the risk of the loan not being paid back. "In MultiBank we also use bills of exchange as a security measure, if the borrower's property covers [the amount of the loan]," Gauer-Sosnowska explained.
New kids on the block
Newly-established firms have the most difficulty in obtaining financing. "It is estimated that 40 percent of small companies do not make it past the first year of their existence," Gauer-Sosnowska said. As a result, banks are often very reluctant to lend to start-ups. "The chances of a new company getting a loan are very slim," she admitted.
MBank's business line director, Marek Piotrowski, agrees. "Not many banks are offering products for start-ups. The risk could be minimized by a higher interest, but that would make the loan conditions unfavorable for the client," he said.
"Sometimes, when a [start-up] company has a very good business plan, the proper collateral and a reliable guarantor, we give them the loan, but it is a very rare situation," says Gauer-Sosnowska. Pietraszkiewicz points out that a new firm's capital doesn't necessarily have to come from a bank. "Start-up capital can come from lending firms and for specific undertakings, these funds can be provided by venture-capital institutions," he explained, adding that there are more than 70 such institutions in Poland.
Revolving door
Small and medium-sized enterprises tend to look for loans for current operations, otherwise known as "revolving loans". "In Poland most small companies operate in the trade sector, where you need funds to buy goods and stock," Gauer-Sosnowska explains.
However, she adds that many small enterprises that take revolving loans often use them to finance investments. "When you take an investment loan you have to provide the bank with evidence of your expenses. With the loans for current operations this is not required," she said. Pietraszkiewicz points out that in Poland, many micro-firms and small companies use household loans to finance the purchase of computers or even cars for their business.
What it takes
Borrowers are required to present confirmation from ZUS and the Tax Office, along with an annual tax statement and information about the company, its financial situation and current operations.
Despite this, growing competition in the market has forced many banks to ease their requirements, and it is sometimes possible to obtain investment loans with less trouble.
"The new tax and legislative changes, which will inspire many entrepreneurs to have clearer finances, will make it easier for banks to rate their reliability, which will result in the growth of offers," the directr of BRE Bank's SME department, Krzysztof Gerlach adds. However, Piotrowski sees a number of reasons for the low SME loan growth. "Entrepreneurs, particularly the small ones, need stability and are very sensitive to political, market and legislative changes," he said.
