Losing the battle with red tape

Since September of 2004 Polish enterprises have been able to submit applications to the Polish Agency for Enterprise Development (PARP) to receive financial subsidies and aid from the EU. The funds are available under a number of EU programs directed at improving the competitiveness of SMEs by giving them advisory assistance, access to modern technology, and the ability to modernize products and offers. Finally obtaining the funding however, is far from a simple process.

"There are two stages here - the first is the banks' consideration of the claims, and the second is [consideration of] whether financial aid from the EU for that particular project will be granted," said the president of the Polish Bank Association (ZBP), Krzysztof Pietraszkiewicz. While the banks consider whether a  project is worthy of financing, he explained, the institutions managing the funds in Poland study if the project is consistent with the policy adopted in that field.

A tall order

"The main problem is that the number of projects accepted [by Polish institutions] is very small," President of Fortis Bank Polska Jan Bujak complains. He points out that the interest in loans for projects eligible for EU funding was very high when the programs took off last year. However, strict regulations and burdensome requirements on the part of the state institutions considering the various applications has resulted in many of them being rejected. "Sometimes the projects don't get accepted because of formalities," Bujak points out.

In order to receive any funds from the EU the company applying for aid must present a thorough business plan to the appropriate Polish government agency. It must also prove that it has the financial means to carry out the project - often a difficult proposition.

"When the beneficiaries of the structural funds might have some problems with securing a loan or collecting the necessary funds, there is an EU Bonds Fund at Bank Gospodarstwa Krajowego [BGK]. Most banks have signed agreements with BGK, and we can see that the number of applications using the guarantees from that fund is growing," Pietraszkiewicz said.

According to this system, banks don't grant the loan right away, but instead issue a promissory note, or guarantee, which the entrepreneur can then use to prove the financial viability of the project.

"Only when the applicant is promised financial aid from the EU will he receive the loan itself," the director of the business product department at MultiBank, Agata Gauer-Sosnowska, said. Usually when the subsidy is finally granted, it is automatically transferred to the bank to cover the loan.

Gauer-Sosnowska says she sees a fall in demand for loans to cover EU-financed projects. "Last December the demand for these loans was very large, now many entrepreneurs have been discouraged and are trying to look for other loans to finance their investments," she said.

Fortis Bank's Bujak notes that the number of applications is quite large, but admits that it is still smaller than a year ago, since many entrepreneurs have been discouraged by the red-tape runaround. He expressed satisfaction with the initial statements by government officials of the need of change in this field. "We firmly agree with this position," Bujak said.