site.btaMany Funding Options on Market Aside from Bank Loans, Companies Struggle with Elaborating Working Projects - Experts

Many Funding Options on Market Aside from Bank Loans, Companies Struggle with Elaborating Working Projects - Experts


Sofia, February 18 (BTA) - Bulgarian companies cannot shake off
their way of thinking as subcontractors, they experience
problems with creating a completely new product, leading experts
in the sphere of project consulting on EU resources commented
for BTA. According to them, Bulgarian companies could be
competitive in creative and relatively niche products. Sometimes
even a strange idea can cover a niche market and turn the
company into a global leader, the experts said.

The Bulgarian market does not lack funding options at present -
there is bank financing as well as various financial instruments
of the EU - but Bulgarian companies struggle with elaborating
and defending working business projects, said Nikolay Angov,
business consultant and founder of the Centre for
Entrepreneurship and Innovations with the Technical University
in Sofia.

There are two main types of financing: debt financing (when you
take out a loan at a specific interest rate and you know how
much this will cost you) and equity financing (when an investor
acquires a share of your business for a specific sum and you do
not know how much this will cost you because you do not know the
price of your companyчs share after a given period of time),
Angov explained.

The companies which want to develop fast should logically use
financial instruments offering equity financing, while the
companies looking for a more moderate growth and temporary
funding for their activity should turn to banks, he said.

JEREMIE is the most well-known programme managed by the European
Investment Fund in Bulgaria which provides financial resources
under Operational Programme Competitiveness. It is a unique
programme for the EU because it covers a company's entire life
cycle: JEREMIE offers from resources for the creation of new
businesses to all kinds of loans for existing enterprises'
further development, Angov told BTA. The European Investment
Fund concludes contracts with funds, banks and other financial
institutions which, on their part, offer funding to companies.

JEREMIE's life cycle is the same as the one of Operational
Programme Competitiveness but while the new Innovations and
Competitiveness programme is awaiting approval from Brussels,
there still are resources at the financial institutions under
JEREMIE which Bulgarian companies can apply for.

There is also funding through risk sharing with banking
institutions as well as through guarantees covering losses for
the loan portfolio, and thus many Bulgarian banks who have
contracts with JEREMIE offer credits at low interest rates.
Financial instruments for the development of an existing
business are also provided under the Risk Sharing Instrument
guarantee scheme of the European Investment Fund.

JEREMIE also offers equity financing for new businesses mainly
under two funds - Eleven and LAUNCHub - as well as for companies
with a high growth potential under the Neveq Capital fund.

According to Teodora Ivanova-Vuleva, expert on EU projects with
the Open Society Institute, Bulgarian companies received
significant funding during the 2007-2013 programming period,
particularly under the schemes for technological modernisation
and energy efficiency. There are no official data yet because
some projects are still being implemented. It is another
question whether these resources have been spent expediently or
not, because it is a generally known fact that projects are
written on a piece-rate basis so that the resources can be
absorbed, without a clear vision on the development of a given
business, the expert said.

Bulgarian companies have shown interest in the HORIZON 2020
programme which was launched in 2014, said Eleonora Karnasa,
head of the European Information and Innovation Centre at the
Bulgarian Chamber of Commerce and Industry. The programme is
managed directly by the European Commission and is unique in
that it currently offers funding of up to 70 per cent for a
single enterprise, without the need of finding and creating a
consortium of companies with international participation, she
explained.

HORIZON 2020 is aimed at funding very innovative products, and a
given project can develop from the phase of concept and
economic assessment through a trial phase to commercialisation
and market distribution. Unfortunately, during the programme's
first two sessions none of the 60 and 30 applications,
respectively, was approved, Karnasa said. She added that only 6
to 10 per cent of European companies succeed in acquiring
funding under this programme.