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62% of companies from the SME sector finance development from their own resources



19.06.2018

 

According to the report by the Union of Entrepreneurs and Employers under the title “Financing of Business in Poland”, the major way how enterprises invest in themselves is using their own funds. These include both savings from the profits made in previous years as well as the currently allocated funds. According to the available data, as many as 62% of companies from the SME sector finance their development from their own resources.

The Union of Entrepreneurs and Employers published its second report on financing of business in Poland. The subject matter is important, because it determines the level of investments made by enterprises for their very own development and modernisation of their activities. And investments obviously are necessary to maintain economic growth.

It’s as clear as day that Polish entrepreneurs from the SME sector finance their activities primarily from their own funds,” says Cezary Kaźmierczak, President of the Union. “Fears of making serious commitments are understandable, but it seems that carrying out really large investments can’t be done without using external financial sources. That is why an appropriately tailored offer and lack of obstacles created by the legislator are such important factors for the development of Polish companies.

The so-called external sources of financing, among which one can distinguish returnable and non-returnable funds, are beginning to play a relatively small, though growing role.

Bank loans are considered the main returnable source of finance. On the flipside, non-repayable funds include subsidies, grants, and money from earmarked funds of the European Union. Especially the last option seems to be very attractive. Only that only a small percentage of entrepreneurs believe that it is relatively easy to obtain them. As many as 43% are of the opinion that the procedure for applying for them is definitely too complicated. And among entrepreneurs who did not receive financing, although they applied for it, 72% were dissatisfied with the procedures.

The report clearly states that it would be advisable that the process of applying for subsidies from European funds could be simplified to the maximum extent. On the other hand, it has to be taken into account that the institutions that grant funds want to have control how the money is spent, hence they demand detailed reports on expenditure. A reasonable compromise would therefore be needed between the expectations of entrepreneurs and the need for supervision.

On the one hand, there is a situation in which subsidies are granted for very dubious projects, yet on the other, complicated procedures are still a key obstacle to the use of EU funds by SMEs,” claims Jakub Bińkowski, the Union’s Law and Legislation Department Secretary.

An important, though still marginally used option of financing development and investment are bank loans already mentioned earlier. A review of credit offers of individual banks indicates that the offer is rich and diverse. It seems, however, that entrepreneurs are still very cautious about making serious commitments.

It should be noted that various forms of leasing are becoming increasingly popular among entrepreneurs. According to the data of the Polish Leasing Association, in 2017, leasing companies financed assets worth PLN 67.8 billion, and as many as 71% of entities that benefited from them were micro and small enterprises. In the first quarter of 2018, there was a dynamic increase in the use of leasing, amounting to as much as 20.9%. The majority of assets financed were vehicles and heavy transport, as well as machinery and equipment. Therefore, it seems that the leasing industry has a promising development prospect, despite the fact that as many as 52% of entrepreneurs declare that they have not used leasing so far and that they have no such intention in the nearest future.

Finally, one ought to mention a relatively rarely used option – factoring. Its popularity is gradually growing, although only 14% of entrepreneurs from the SME sector made use of it last year. It has the advantage of solving one of the main problems in running a business, namely eliminating payment blockages, which as many as 81% of micro, small and medium enterprises are struggling with. In 2017, factoring companies purchased receivables for a total amount of PLN 185 billion, which is quite a lot.


19th June 2018 Report of the Union of Entrepreneurs and Employers: Financing of Business in Poland.

 

Photo. Helloquence / on lic. Unsplash

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