Download Outcomes of de minimis Guarantee Scheme

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Outcomes of de minimis Guarantee Scheme
implemented by Bank Gospodarstwa Krajowego
Outcomes of De minimis Guarantee Scheme implemented by Bank Gospodarstwa Krajowego
This booklet is a summary of a larger research report
by Tomasz Kaczor PhD and Agnieszka Kowalczyk
and is available in an electronic version (PL).
Bank Gospodarstwa Krajowego
Al. Jerozolimskie 7, 00-955 Warszawa
www.bgk.pl
Analyses and Research Department
Tel: +48 22 599 82 43
[email protected]
Copyright: Bank Gospodarstwa Krajowego. All rights reserved.
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About de minimis Guarantee Scheme
The government aid scheme for SMEs, or „De minimis
Guarantees” (De minimis Portfolio Guarantee Line, PLD),
was launched in spring 2013 in response to the economic
slowdown that particularly affected micro, small and mediumsized entrepreneurs (SME). De minimis Guarantees were an
answer for the needs of SMEs in the scope of access to current operation finance. The support under the Scheme was
based on the principles of de minimis aid.
More than 83 thousand of the state-owned Bank Gospodarstwa Krajowego (BGK) guarantees were granted during
the first 17 months of the Scheme, securing nearly
PLN 24 billion of credits. The most numerous group of Scheme
participants, for as much as 75%, are micro entrepreneurs.
For loans financing their current and investment activities,
SMEs may obtain loan repayment guarantees offered by Bank
Gospodarstwa Krajowego through lending banks enrolled
to the Scheme.
De minimis Guarantee secures up to 60% of the credit amount
both in the case of working-capital as well as investment
credits. It does not cover interest and other credit-related
costs. It is secured with a blank promissory note of the
entrepreneur, and the commission on the guarantee granted
is 0.5% of the guarantee amount per annum.
The only major difference between the guarantee securing
a working-capital credit and the guarantee securing an
investment credit is the duration: in the case of the former,
the guarantee is granted for 27 months at most, while for
investment credit—for 99 months.
The benefits for entrepreneurs, resulting from application for guarantees, included, inter alia:
• availability of lending for bank’s clients with a short
credit history or lack of sufficient collaterals,
• elasticity in own estate management, i.e. the part
covered with de minimis guarantee—the entrepreneur does not have to pledge it to the benefit of
the lending bank or Bank Gospodarstwa Krajowego.
• time savings—all formalities are completed directly
at the lending bank simultaneously with loan award,
• reduction of total credit costs due to e.g. lower
margin or commission,
• simpler application procedure—completion of the
application for a guarantee along with the provision
of information about the public aid.
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Outcomes of De minimis Guarantee Scheme implemented by Bank Gospodarstwa Krajowego
About the study
The main aim of the study under consideration, conducted
by Bank Gospodarstwa Krajowego, was to assess the accessimproving effects of De minimis Guarantee Scheme in the
scope of external financing for micro, small, and mediumsized entrepreneurs, and also effects of the aid on the results
of companies operating in conditions of economic downturn,
and on the Polish economy.
The aim was achieved by answering the following
research questions:
• How would you assess the degree of accuracy of De
minimis Guarantee Scheme in improving the access
to external financing for SMEs and satisfying their needs
in this scope?
• How would you assess its effectiveness in limiting the
financing gap and related barriers?
• How would you assess the level of usefulness of the Scheme
in terms of direct and additional effects measured first of
all with changes in employment ratios, market position,
turnover increase, or investment completion thanks to the
released funds?
• What benefits did the economy, and first of all the SME
sector, gain as part of de minimis guarantees?
The assessment of outcomes of the government Scheme
we conducted on the basis of evaluation criteria measuring
accuracy, effectiveness, usefulness, and sustainability of
de minimis aid.
In the study, we used standardised and deepened reporting data analysis, data obtained in personal interviews with
Scheme participants and survey data collected with the use
of CATI method from 973 entrepreneurs in the SME sector
who used de minimis guarantees.
4
We grouped the results
of the study under the following
thematic blocks:
Description of the Entrepreneur
str. 5–6
First of all we characterised
the Scheme beneficiary - an entrepreneur
who used de minimis guarantee,
and their experience in terms of access
to financing in the past.
Relevance and effectiveness of the
Scheme - limitation of the financing gap
s. 7–8
This part includes results concerning
first of all the diagosis whether
and to what degree the Scheme
reduced the financing gap in the SME sector.
Utility and sustainability
of the Scheme
s. 9–12
The last block of results comprises
the assessment of Scheme effects both
at the level of the entrepreneur as well as
in the macro scale (impact of the Scheme
on selected economic indicators).
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The most important study results
Description of Scheme participants—their needs and experience in obtaining external financing in the past
In relative terms, the most active group in obtaining external
financing as part of De minimis Guarantee Scheme are small
and early stage entrepreneurs (27% of respondents are
companies present on the market for a period from 1 to 3
years, start-ups—21%), for whom refundable financing is not
considered the most appropriate development instrument.
However, the analysis has shown that the relevant design
of the aid made this form of support attractive also to young
businesses.
During the study, we did not record significant differences in
amounts of credits granted in the groups of entrepreneurs
with different market seniority. It suggests that young
companies (and start-ups in particular), even those without
extended credit history, have obtained external financing in
a desired amount when supported with de minimis guarantee, and the PLD Scheme is a tool that equalises financing
access disproportions stemming from the period of operation
on the market.
The amounts of credits with de minimis guarantee obtained
are significantly higher when compared to the refundable financing applied for by SMEs in 2011, when only 28% of them
declared participation in the working-capital credit application
procedure for a credit higher than PLN 50 thousand. Whereas,
the outcomes of de minimis aid analysis show that as much as
70% of companies have received such a credit, with 62% of
micro entrepreneurs among them. This result demonstrates
that de minimis guarantee was a factor contributing to higher
debt financing obtained by companies, including those coping
with the gravest difficulties in leveraging external financing.
In the past, 18% of the surveyed PLD Scheme participants
found themselves in the financial gap, understood both as
lack of or difficult access to financing when attempted, but
also as resignation of the entrepreneur from applying for
financing because of probable rejection of the application.
Half of them experienced problems in the form of refusal
(2%) or worse financing conditions (7%), and next 9% of all
respondents possibly located within the gap resigned from
applying for external financing although they needed it.






the company was granted the requested working capital credit or loan
credit/loan was granted with less favourable conditions than requested (e.g. shorter
crediting period, lower credit amount)
complete refusal of working capital credit or loan
in the recent 2 years (until applying for a credit with de minimis guarantee), the company
needed a loan or working capital credit but opted out from applying for it
not applied/not needed
I don’t know
Source: own study of BGK on the basis of the survey
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Outcomes of De minimis Guarantee Scheme implemented by Bank Gospodarstwa Krajowego
In the past, the biggest problems with external financing
were experienced by companies operating on the market for
a period from 1 to 3 years (10% of them received financing
on worse conditions, and 2% were rejected financing at all)
and micro entrepreneurs (7% and 2%, correspondingly).
According to nearly 40% of our respondents who have
not obtained financing or have obtained it, but on worse
conditions, the basic reason for difficulties in access to
working-capital financing was lack of collateral for the credit
or loan, required by banks.







lack of required collateral for working capital credit or loan
refusal without stating the reason
low company’s revenue and turnover
unsuitable bank’s offer or burdensome procedures, requirements
and costs of credit
period of operation in the market too short
credit interest rate too high
other reason
Source: own study of BGK on the basis of the survey
In turn, the main reasons for resignation from applying for
external financing for the entrepreneurs were first of all:
burdensome and lengthy procedure (41%), unfavourable
conditions of the loan/credit or the crediting period (25%)
and lack of sufficient collateral (15%).





cumbersome and lengthy procedure of obtaining credit/loan
unfavourable financial conditions of the credit/loan or concerning
the crediting period
insufficient credit or loan collateral
other source of financing
other reasons
Source: own study of BGK on the basis of the survey
For many of the entrepreneurs, a collateral in the form
of guarantee not only lifted the barrier consisting in lack
thereof, but also provided an indirect way to simplify
the procedure for collateral obtainment, and thus, also
the whole loan/credit procedure, and to improve crediting
conditions. Therefore, we can assume that for the 15% that
resigned from application earlier, the PLD Scheme eliminates
the main reason for resignation, while for 66% of them
de minimis aid constitutes an element limiting the reasons
for resignation.
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The results of the BGK’s survey, pointing out lack of
collateral as one of main reasons for both the failure to
receive a credit or loan or receiving it on worse conditions
as well as for informed resignation despite a need in this
scope, once again confirm the value of De minimis Guarantee Scheme, which directly addresses the issue of lacking
collateral.
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Relevance and effectiveness of the aid—reduction of financial gap
in result of PLD Scheme implementation
29% of the entrepreneurs surveyed by us decided to use
the aid in the form of a de minimis guarantee first and
foremost because of the lack of sufficient collateral for the
credit amount they wished to apply for. Next 25% had a pos-
sible collateral available, but considered it infavourable for
the development of their company or the owner to utilise it.
Such outcomes directly confirm the accuracy of PLD scheme
assumptions.
the company had relevant collateral but the de minimis
guarantee
enabled to earmark its collateral for other purposes
(e.g. collateral of another credit)
company had the potential collateral which was suitable
the
for the crediting bank but did not want to use ii, because it
was detrimental to the company or the owner (e.g. secured
with private real estate)
Source: own study of BGK on the basis of the survey
In the case of the other 46% of entrepreneurs (who had
relevant collateral), de minimis guarantee enabled them to
earmark their collateral for other purposes, e.g. another
credit, thanks to which they obtained an opportunity to intensify business operations. This is one of the most significant
outcomes of our survey, indicating that the aid under the
Scheme was not only a simple instrument securing the credit,
but in many cases it could be also an impulse to further
development and investments of the company. Taking this
fact into consideration we may cautiously say that a low-risk
financial instrument, i.e. a working-capital credit guarantee
making the credit more attractive for the entrepreneur,
results—in many cases recorded in the study—in the release
of funds and possibility of investing, activating at the same
time a high-risk mechanism, namely investments in such
assets/enterprises as considered by the entrepreneurs (each
of them individually) most reasonable in the context of their
needs.
company did not have sufficient collateral for the credit
the
(e.g. had no real estate)
In the whole population of our study, 33% of entrepreneurs
fell into the financial gap, including:
• 19% of the entrepreneurs would not have obtained
a working-capital credit without de minimis guarantee,
• 14% would have obtained a credit, but in a lower amount
(the average amount of credit received without de minimis
guarantee would have been lower by approx. 30%).
the guarantee,
without
the company would
have obtained a credit
of the same value
the guarantee,
without
the company would
have obtained a credit
of lower value
the guarantee,
without
the company would not
have obtained a credit
it’s hard to say
Source: own study of BGK on the basis of the survey
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Outcomes of De minimis Guarantee Scheme implemented by Bank Gospodarstwa Krajowego
On the basis of the analysis of data collected we observed
a similar level of credits obtained by companies having
broader (international and national) range as well as by
companies with a narrower (local and regional) coverage.
Whereby the study on the financial gap, conducted in 20131,
implies that broad range of activity is correlated with higher
odds to obtain a working-capital credit. Thus, a positive impact of de minimis guarantees on the possibility of obtaining
external financing by entrepreneurs with less disseminated
operations can be noted, as 55% of all companies unable to
obtain a working-capital credit without guarantee are entities
operating locally and regionally.
Results of the study of Bank Gospodarstwa Krajowego show
that a standarised, simple and commonly accessible tool
of support in SME sector has been designed which—when
accurately targeted—turned out to be the greatest success
among guarantee schemes carried out in Poland so far. The
above is connected, among other things, with the fact that
the amounts available as part of de minimis aid have been
accurately estimated and correctly targeted in correspondence to the needs of entrepreneurs
In the light of the outcomes of our study, companies active on the marked for a period from 1 to 3 years seem to
constitute the group in the most need of support and at the
same time a group using the support in the best way. Most of
them (37%, which is nearly two times more than in the case
of start-ups) most commonly used de minimis guarantees
because of the lack of collateral satisfactory for financial institutions, and 61% of them used the guarantee only to secure
a credit. Every fourth representative of this group, even if
able to obtain a working-capital credit without the guarantee,
would not have obtained it in such a high amount.



the company did not have sufficient collateral for the credit
for which you applied (e.g. had no real estate)
the company had the potential collateral which was suitable
for the crediting bank but did not want to use it because
it was detrimental to the company or the owner
(e.g. secured with private real estate)
the company had relevant collateral but the de minimis
guarantee enabled to earmark its collateral for other purposes
(e.g. collateral of another credit)
Source: own study of BGK on the basis of the survey
Assessment of the gap in the access of Polish entrepreneurs to external financing. Conclusions and recommendations for the cohesion policy programming process in 2014–2020”, IBS 2013.
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Utility and initial sustainability of the aid: positive effect
at the enterprise level and in macro-economic account
Most frequently, the credit with de minimis guarantee has
been used by entrepreneurs as a business tool necessary for
the development of the company (70% of responces). Only
17% of the respondents considered the aid to be a kind of
nostrum for financial liquidity issues.



in order to solve recurring problems with liquidity

it’s hard to say
in order to solve a one-off problem with liquidity
in order to use the credit as a permanent business tool for the
company’s financial management
Source: own study of BGK on the basis of the survey
As a business tool, credit with de minimis guarantee is most
frequently used in trade. On the other hand the least frequently, for only by every fourth of the surveyed companies,
it is used in the construction sector which needed workingcapital financing to solve problems with payment bottlenecks.
Considering the fact that the sector was relatively strongly
affected by the economic slowdown, our results demonstrate
the effectiveness of PLD as a mechanism limiting the effects
of the downturn.
The survey allows to draw a conclusion not only about
a positive impact of the aid on payment bottlenecks solving,
but also that an additional, qualitative effect of de minimis
guarantee has appeared, consisting in raised awareness
and level of knowledge concerning the use of refundable
financing instruments in strategic management of company’s
capital among micro, small, and medium-sized enterprises.
This is an important outcome, the so-called experience effect
of PLD Scheme implementation.
A comparison of results for our whole research sample and
the group of companies covered with the financing gap
reveals that the Scheme has even a stronger effects on the
entrepreneurs within the gap. The highest percentage of the
surveyed indicated the maintenance or improvement of their
market position, stabilisation of financial situation, i.e. elimination of bottlenecks and improvement of liquidity to a level
enabling new investments. It is important to note that four
out of six indicators of business performance show higher
values for respondents falling within the financing gap (it is
particularly the case for the financial stabilisation indicator,
turnover increase, and new investments).
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Outcomes of De minimis Guarantee Scheme implemented by Bank Gospodarstwa Krajowego


all surveyed entrepreneurs
entrepreneurs from the
financial gap
Source: own study of BGK on the basis of the survey
Entrepreneurs who have not observed any positive results
yet, expect to see them in the nearest future, including first
of all in the context of creation of new jobs, maintenance
or improvement of market position, and turnover increase.
Similarly as for the effects that occurred, the values of most
indicators are higher for companies included to the financing
gap.


Source: own study of BGK on the basis of the survey
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all surveyed entrepreneurs
entrepreneurs from
the financial gap
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The total of 1329 jobs have been created in the surveyed
enterprises, and there are plans to create next 537 jobs.
Basing on the answers of the respondents, we have estimated that each PLN 1 of awarded de minimis guarantees
corresponded to 0,39 PLN of investments possible thanks to
the credit obtained because of the guarantee.
The analysis of the survey data makes it possible to make
a conclusion that relatively best effects have been recorded
by companies operating on the market for a period from
1 to 3 years, since as much as 80% of them have created
new jobs, 58% maintained the existing ones, 63% carried
out investments, and 49% improved their market position
against 42% that maintained it.
Nearly 90% of the surveyed declared that the new jobs would
be maintained longer than for a year, while 93% declared the
same for the existing jobs.



yes
no
it’s hard to say
Source: own study of BGK
on the basis of the survey
53% of our respondents who used a credit with guarantee to
solve recurring liquidity problems estimated that de minimis
aid enabled them to resolve these difficulties for a period
longer than one year as of obtaining the credit. This result
allows a fairly optimistic assessment of the working-capital
aid sustainability.



for a period shorter than 1 year
from the date of obtaining the
working capital credit
for a period longer than 1 year from
the date of obtaining the working
capital credit
it’s hard to say
Source: own study of BGK on the basis of the survey
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Outcomes of De minimis Guarantee Scheme implemented by Bank Gospodarstwa Krajowego
In the context of macroeconomic effects of the Scheme,
we have observed that an additional credit pool was generated in the case of entrepreneurs which would be unable
to obtain financial support without de minimis guarantees
(the credit pool would not have occurred had the PLD not
been implemented). The observation is confirmed also by the
NBP’s studies on the situation of the credit market, which
show that in 2013 Q3, we recorded an increase in demand
for short-term lending, mainly on the part of SMEs. Banks
indicated the launch of the guarantee scheme as the most
important reason for the growth in demand, apart from the
lower interest rates.
In result of the study we have estimated that the value
of credit granted to enterprises belonging to the research
sample and at the same time to the financial gap totalled
PLN 55.8 million (the average credit amount at a level of
PLN 312 thousand). To extrapolate the research data onto
the whole population, we have used sales data as at the end
of July 2014, according to which 79.1 thousand credits with
de minimis guarantee have been granted since the launch of
the Scheme, totalling to more than PLN 22.5 billion.
Therefore, for the whole population of Scheme participants,
we have arrived at the amount of PLN 5.5 billion of additional lending which could not have been possible without
de minimis guarantees. Taking into account the NBP data
concerning receivables and liabilities of banks2, showing that
in the period of the Scheme, the value of bank’s current
receivables from enterprises increased by 3PLN 7.1 billion, we
may assume that de minimis aid accounts for more than ¾
of the total net increase in the receivables during the Scheme
period4.
We have also estimated the impact of the PLD Scheme on
employment indicators for the whole economy. Entrepreneurs included into the financing gap stated that thanks to
the credit with de minimis guarantee it had been possible to
create 229 jobs—1.28 per enterprise at the average. In order
to calculate the effect for the whole population of Scheme
participants we assumed that new jobs are proportionately
connected with the additional credit obtained. Based on that
we can estimate that in all companies that used de minimis
guarantee, approx. 22.5 thousand jobs were created. The
result above should be treated with due caution, since it is
impossible to exclude that in the case of lack of access to
lending it would have been possible to obtain financing from
other source and that the improvement of the situation of
the Scheme beneficiaries caused a relative, corresponding
deterioration of situation of their competitors, levelling part
of the effect.
2
Data until July 2014
3
From the end of February 2013 to the end of July 2014.
4
We emphasise that it does mean that De minimis Guarantee is responsible for ¾ of credits awarded during the Scheme period. Preparation
of the analogical account for newly granted gross credits was impossible due to lack of data in this scope for the whole baking sector.
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Bank
Gospodarstwa
Krajowego
Analyses
and Research
Department
www.bgk.pl
11/14
[email protected]
tel.: +48 22 599 82 43