SECO Start-up Fund (SSF) Project Financing in Developing and Transition Countries managed by FINANCEcontact Ltd., Zurich JCC Event November 4, 2014 Update Ukraine 1
Characteristics of the SECO Start-up Fund 1. Unsecured loans for commercially viable investment projects in the private sector of supported countries (defined by SECO) 2. Start-up projects within the first three years 3. Targeted clients: Swiss SME s in need of project financing in the supported countries 4. Projects must contribute to the development of the supported countries by Creation of jobs Training of employees (know-how transfer) Social responsibility Environmentally friendly production Positive impact on the trade balance by exports of goods or import substitution 5. Favorable terms 6. Only for projects, for which no other commercial financing sources are available 2
Countries supported by the SECO Start-up Fund South East Europe Albania Bosnia-Herzegovina Kosovo Macedonia Montenegro Serbia CIS Countries Azerbaijan Kyrgyzstan Tajikistan Ukraine Latin America Colombia Peru Middle East & Africa Egypt Ghana South Africa Tunisia Asia Indonesia Vietnam Exceptions for projects in other countries can be considered, if a project can produce an outstanding development impact. 3
Millionen Since 15 years: 115 loans granted for CHF 40.2 million CHF 245 million of investments mobilized for 10 182 new jobs CHF 7.4 investment CHF 1 of loan CHF 3 200 of loans 1 Job 5.00 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 CIS South East Europe Asia Latin America Middle East / N- Africa number of new projects per year (2014 year-to-date) 11 15 7 8 9 10 7 6 5 5 6 2 7 6 7 4 4
Loan Portfolio of SECO Start-up Fund 1999-2014: 115 loans granted CHF 40.2 million 38 loans outstanding CHF 10.7 million Loans granted by region South East Europe 40% CIS 21% Africa 13% Middle East / N- Africa 4% Latin America 9% Asia 13% Electronics Education Mining Instruments Transportation Tourism Textile Pharma Machinery Timber Environment Furniture Metal IT / Telecom Energy Construction Food / Agriculture Loans granted by industry 0.2 0.5 0.6 0.9 0.9 1.1 1.1 1.2 1.4 1.8 2.3 2.5 2.8 2.9 3.0 5.5 11.7 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0 12.0 million CHF 5
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Typical SSF Project Development FINANCEcontact involvement: coaching and monitoring, visits and coaching SSF application Sales planned Sales realised Investments funding: Equity & SSF Investments additional funding: local Banks 1 2 3 4 5 6 7 8 5 year repayment period 10
Loan conditions of SECO Start-up Fund 1. Meeting Eligibility Criteria: Eligible country Swiss residency of the borrower Private sector investment Loan amount up to CHF 500 000 with the borrower at least raising 50% of initial investment costs 2. Show business viability of the project as well as financial and management capacity of the projects promoter 3. Loan Repayment within 5 years 4. Interest rate based on the yield on Swiss Confederation bonds for 10-year maturities (0.5% as of November 2014) plus an annually increasing risk premium of 1.5% to 4.5% (i.e. 2.0-5.0%) 5. Development Impact and social factors of the planned investment 11
Loan granting procedure takes about 3 months 1. Review of submitted documents Business and financial plan Legal documents Financial statements /status of borrowers 2. Review of business environment Interview with project sponsors Country, market, technical inquiries 3. Application sheet and fee (1% of requested loan, minimum CHF 1 000) 4. Expert Committee 6 independent experts 4 meetings per year express opinion about credit-worthiness of project to SECO 5. Loan agreement with SECO followed by planned disbursements 6. Monitoring communications site visits administration, all done by FINANCEcontact 13
Benefit of funding through SECO Start-up Fund Liquidity Co-financing No risk premium Network Underdeveloped Support Liquidity or bank facility of the Swiss borrower is not affected by the new operation in an emerging market country May facilitate co-financing through a local bank Loans in High Risk Countries without charging a specific country risk premium. Broad SSF / Swisscontact network may help to arrange contacts to other funding partners, embassies, chambers, business consultants and Investment Promotion Agencies SECO and SSF are particularly inclined to foster projects in underdeveloped regions and economies in transition. Each team member has more than 10 years of expertise in business development in emerging market countries and can offer valuable advice and support. 14
Obstacles during project implementation Sales delayed Skills of workers potential clients delayed orders or asked for different assortment more difficulties in recruiting the required skills of workers; more time to raise productivity to the expected level; expensive and time-consuming public transport to the factory Customs clearance takes 3-5 weeks until imported goods are released; complicated procedures (no routine work); uncooperative attitude Authorities Supplier quality Implementation when applying for SME support more restrictive than advertised; most of local general manager s time to find solutions for a multitude of administrative hurdles lower quality of locally supplied material not reflected in lower price; (now sourcing in whole EU instead - but at new payment conditions); quality equipment still to be sourced from Switzerland more time-consuming and more expensive than planned and expected requires sufficient financial reserves and management capacity. 15
Contact SECO Start-up Fund www.secostartupfund.ch Andreas Ragaz Tel. +41 79 592 97 71 (mobile) Tel. +41 44 454 17 81 E-Mail: ragaz@finance-contact.ch Susanne Grossmann Tel. +41 79 109 88 85 (mobile) Tel. +41 44 454 17 80 E-Mail: grossmann@finance-contact.ch FINANCEcontact Ltd. Hardturmstr. 123 CH-8005 Zurich 16