FinancEast, a program financing micro, small and medium-sized enterprises in the Donetsk and Luhansk Oblasts, was launched in Ukraine on 20 December. To support regional businesses, the European Union allocated 9.5 million euros via the KfW.
Read on to learn more about this program, its founders and goals, and to find out who can be eligible for financing and in what amount, how to become a program’s participant and where to apply for assistance.
What is this program about? And what is its goal?
FinancEast was developed as part of the Project of the European Union’s Support for the East of Ukraine and the EU’s EU4Business initiative. This is a joint project of the Government of Ukraine and the European Commission which represents the European Union.
The main goals of this program are to resume financing of micro, small and medium-sized enterprises (MSMEs) in the Ukrainian government-controlled territory of the Donetsk and Luhansk Oblasts, facilitate economic recovery of the Donbas and improve investment attractiveness of the entire region.
Who implements this program?
This program is implemented by the European Union via the KfW and by the Entrepreneurship Development Fund (EDF) created on the basis of the German-Ukrainian Fund. The immediate implementer of FinancEast program is EDF.
For how long will it continue?
The program started on 20 December 2019, and will continue until 2022 or wind up earlier, if all funds allocated for this program are disbursed!
What partner institutions provide loans?
Projects are financed via three partners: Savings Bank, Ukrgazbank and OTP Leasing. To find out more about the terms of and eligibility for a loan or lease, visit the nearest branch or office of a partner institution in your city.
What is the amount of loan or lease?
To implement this program on the whole, the European Union provided a 9.5 million-euro grant to Ukraine. This money will be used to refund, in the form of compensation payments, up to 50% of the cost of MSME investment projects (excluding VAT).
The structure of financing is as follows: for example, if you want to purchase agricultural machinery worth 100,000 euros (in the hryvnia equivalent, excluding VAT), you need to make a 20% down payment (20,000 euros) and take a loan or a lease for the remaining 80% (80,000 euros). At the same time, the structure of financial support from the EU is a 50% subsidy and a 50% compensation.
What is an investment project?
An MSME investment project includes medium- and long-term operations (with the duration of more than one year) involving procurement, improvement or reconstruction of MSME fixed assets. In other words, it could be a lease or financed purchase of agricultural machinery, equipment and motor vehicles; installation, construction, reconstruction and commissioning of commercial facilities, and the like.
How to participate in this program?
To participate in this program, visit the head office of any partner institution participating in the program (see: answer to question 4) or the nearest office of a partner institution in your region. The addresses of these offices can be found on the official websites of the partner institutions. Their specialists will provide an exhaustive consultation regarding the format and content of documents which you will be required to complete and submit to apply for a loan or lease.
The decision to approve your loan or lease application will be made solely by the partner institution.
Who is eligible to participate and what are the requirements to entrepreneurs?
Entities eligible for participation in the program:
- micro, small and medium-sized enterprises (sole proprietorships and legal entities) with the number of personnel of up to 250 persons and the annual income of up to 10 million euros in the hryvnia equivalent according to the NBU’s official exchange rate.
Important! More than 75% of the authorized capital of your business must be privately owned. The state-held stake cannot exceed 25%.
In addition, MSMEs must fulfill the following criteria to be eligible for participation in the program:
- registered in Ukraine (with the exception of the temporarily occupied territory of the Donetsk and Luhansk Oblasts, the Autonomous Republic of Crimea and Sevastopol) and operating and having their production infrastructure (production facilities, equipment, farmland, etc.) in the Ukrainian government-controlled territory of the Donetsk and Luhansk Oblasts not closer than 5 km to the confrontation line (delimited according to data by OSCE: https://liveuamap.com/)
- implementing an investment project in the Ukrainian government-controlled territory of the Donetsk and Luhansk Oblasts. If an MSME is registered outside these two oblasts (anywhere else in Ukraine with the exception of the temporarily occupied territory of the Donetsk and Luhansk Oblasts, the Autonomous Republic of Crimea and Sevastopol), its investment project must envisage the use of investments in the Ukrainian government-controlled territory of the Donetsk and Luhansk Oblasts;
- having stable financial standing and conducting real economic activity for at least one year;
- illegal employment of personnel and registration of employees as sole proprietors are unacceptable;
- not having overdue loan and/or financial lease payments;
- not having negative credit history during the past 12 months;
- not undergoing dissolution, liquidation, reorganization or bankruptcy proceedings;
- not being subjected to any personal (individual), special economic or other sanctions;
- not being a part of a large corporation or a group of companies, and not having economic and financial dependence on and relationships with large businesses.
What kind of MSMEs can participate in the program?
All MSMEs can be eligible to receive financing for development of an own project, with the exception of those engaged in:
- any activity involving harmful or exploitation forms of forced or child labor;
- any activity deemed illicit under the national legislation or international law;
- manufacture or sales of arms, manufacture of military gear or other equipment;
- production or trade involving endangered animal or plant species;
- manufacture or sales of tobacco products;
- production or sales of hard liquors;
- operation of casinos;
- speculative foreign exchange transactions;
- investments in securities of any kind;
- purchase, sale or lease of immovable property for speculative purposes;
- purchase of fixed assets under this program for subsequent lease and/or rental to other persons;
- other activities defined by the KfW as prohibited.
Where can I find more information?
For more detailed information about FinancEast program and all terms and conditions for potential entrepreneur participants, visit the official website of the Entrepreneurship Development Fund.
The Entrepreneurship Development Fund is the legal successor of all rights and obligations of the German-Ukrainian Fund, which in turn, was established by the German state-owned development bank KfW, the Cabinet of Ministers of Ukraine and the National Bank of Ukraine.
EU4Business is a EU initiative which provides support to the private sector in Eastern Partnership countries, and particularly Ukraine. The goal of this initiative is to improve business environment by providing professional advice and access to financing of SMEs. The support from EU4Business is provided jointly with other organizations. This initiative promotes development and creation of new jobs.