Good to know: where small and medium-sized enterprises can find support in Ukraine

Owners of small and medium-sized enterprises (SME) in our country got used to be completely self-reliant. At the same time, under complicated economic conditions any financial or economic support may be helpful. There are numerous business support programs, including international projects and bank loans.  

If you have work experience and want to start your own company you can apply to the state employment center and obtain a one-time payment equivalent to all monthly unemployment compensations you are entitled to receive during one year at the labor exchange. In practice, it’s the only financial support which our government can provide to SME. Nevertheless, if you are truly determined to start a new company or continue to develop an existing one, there are numerous loan options to take advantage of. Let’s take a closer look at some of them.

Don’t expect assistance from the government 

The Law of Ukraine «On Development of the State Support of Small and Medium-sized Enterprises in Ukraine» № 4618-VIregulates relations between the government and business entities. Ukrainian SME sector produces only 15% of the national GDP, while in Poland its contribution amounts to around 98.5%. It’s quite obvious that the aforementioned law fails to provide adequate support for business and lift the oppressive bureaucratic burden off companies. It’s also worth mentioning that the draft law of Ukraine «On Development of State Support of Small and Medium Sized Enterprises in Ukraine» № 1256, prepared by the relevant Verkhovna Rada Committee was never adopted. 

There are no state business support programs in Ukraine, so the overwhelming majority of investment initiatives for SME are conducted and supervised by different international organizations. As a rule, conditions of funding provision are quite beneficial and foresee allocation of considerable loans with small interest rates. Nevertheless, these programs also have some reservations, as international organizations majorly invest funds in agriculture, IT and projects related to the application of alternative sources of energy. 

COSME – is a set of industry-specific programs and projects for 2014-2020 with a total budget of 2.3 billion USD. The program is divided into 25 separate projects in 3 key spheres: facilitation of access to new external markets, enhancement of competitiveness and development of business culture. SME, NGO, agencies of regional development, business associations, state bodies and educational establishments are eligible to participate in COSME programs. You can submit an application via the program’s website by selecting a relevant project. In the project description, you will find all relevant details including the application deadline and eligibility requirements. All applications are to be submitted in English language.   

Are you a startup owner? Then you should participate in Unlimit Ukraine project launched by European Business Association. Among its participants, you will find the most innovative Ukrainian companies, such as Drone.ua for example, which provides technical assistance to agricultural enterprises. If you own an SME with production facilities in Ukraine which operates on the market for less than 7 years and produces smart, qualitative and innovative products you have a chance to stand in one line with the best Ukrainian providers of products and services. Within the framework of this project, participants have an opportunity to benefit from informational and consulting support, as well as establish valuable business contacts. 

EBRD in Ukraine supports entrepreneurs working in different industrial sectors including food and beverages production, wholesale and retail trade, construction and engineering. Though, EBRD does not provide support to companies engaged in insurance, gambling, tobacco, military and defense as well as alcoholic beverages production industries. At the same time companies operating in spheres of IT-consulting, marketing, facilitation of transition to European reporting standards as well as of access to international markets are encouraged to apply for EBRD grants. The Bank concentrates its activity mainly on the development of business projects in regions. 65% of projects are implemented outside Kyiv. In order to receive EBRD grant, a company should have less than 250 employees and conduct its business activities for less than 2 years. The grant application requires provision of the minimal set of documents, while its consideration takes only 15 days. 

EBRD also implements special projects. «Women in Business» is one of them and is aimed at provision of business consulting and training services to female managers. Another example is the program facilitating export promotion aimed at companies which already export or are planning to start exporting their products and services. 

Microloans program is suitable for individual entrepreneurs, micro companies as well as SME. Companies operating in spheres of products manufacturing and services delivery, agriculture and trade (only for individual entrepreneurs and micro companies) are eligible to obtain funding within this program. 

MSME loans program (loans for micro, small and medium-sized enterprises) is aimed at provision of concessional terms loans to companies in spheres which the fund considers as strategically important. These spheres are agriculture (including horticulture), fish-farming, food-manufacturing, small-hotels ownership, green tourism, restaurant business, consumer goods manufacturing, as well as projects related to efficient use of energy and designed to improve workforce productivity or create new job opportunities in underdeveloped regions of the country. Within this program, individual entrepreneurs and MSME can receive €100-€300 thousand grants (for big investment projects, such as the construction of vegetable storehouses, for example).  

United States Agency for International Development (USAID) presented a program of financing of Ukrainian agricultural companies in rural areas through credit unions. The project will be implemented throughout 2016-2020. USAID is responsible for the funding of the project while World Council of Credit Unions (WOCCU) will deal with its implementation. According to the National Commission on the State Regulation of Financial Services Markets, in 2016, the number of credit unions members in Ukraine dropped by 13% - down to 674,1 thousand persons. Credit unions of Lviv region have the highest number of members (110.7 thousand) while those of Kyiv and Kyiv region accumulated the largest amount of funds (576,7 million UAH).  

In order to provide a loan a bank has to be sure that the company is reliable. So as to prove it, a company should lodge a deposit or provide a guarantee of another entrepreneur to the bank. Ukrainian banks continue to provide loans, but due to high-interest rates, average entrepreneurs can’t afford them. The demand for the loans for replenishment of floating capital, purchase of new equipment and real estate is particularly high among Ukrainian entrepreneurs. At the same time, agricultural sector remains the most attractive sphere for investments. 

Cooperation with major retailers of agricultural machinery and plant protection products allows Raiffeisen Bank Aval to allocate loans to its clients under more beneficial conditions. The bank provides agricultural companies with access to its bill program, which is far more affordable than standard loans. For example, under this program, Bayer provides 6-9 months delay in payment to companies, while the transaction itself is secured from floatation of the currency exchange rate. 

After three years of the program’s implementation, Credit Agricole now owns 50% of all loans allocated to agricultural companies in Ukraine. Furthermore, the bank also provides loans for investment purposes covering the purchase of agricultural equipment, construction of grain elevators, replenishment of floating capital (seasonal financing of sowing and harvesting campaigns, payment of salaries, etc.). 

Despite the absence of governmental support for SME in Ukraine, entrepreneurs have some options to choose from. Amid economic crisis numerous international programs, projects and grants can be very helpful for business owners. Such initiatives may help them access new markets, identify perspective directions for the development of their business as well as assist emerging entrepreneurs to start their own companies.