At a time when we hear words such as recession, crisis and debt on all sides, a new entrepreneur trying to raise start-up capital through a loan is in a truly unenviable position. Banks aim to lend only to clients who are able to repay their obligations over the long term. Because new businesses are statistically far more likely to fail than companies with several years’ trading history, banks assess their business plans much more strictly.
Many banks offer special “start-up loans” to new entrepreneurs. However, the business plan must be realistic and capable of generating the required return. The purpose for which the entrepreneur intends to use the borrowed funds is also important: buying machinery or property requires a much larger loan than day-to-day operations. Banks’ criteria for new entrepreneurs are very strict indeed.
The National Agency for the Development of Small and Medium-Sized Enterprises.
Loans from commercial banks are not the only way to obtain the necessary funding. New entrepreneurs who lack the required capital can also use the micro-loan programme of the National Agency for the Development of Small and Medium-Sized Enterprises (NARMSP). Applications should be made to one of the agency’s regional centres, where the applicant will receive the necessary forms and detailed information about the programme.
A loan from the agency can be used to purchase necessary assets, to renovate or adapt premises and to buy the necessary stock. The interest rate is equal to the base rate of the National Bank of Slovakia. As with a bank, the agency will not grant a loan without a business plan.
The labour office can help the unemployed.
An unemployed person who wishes to start a business and has been registered with the labour office for at least 3 months may apply to the labour office for a self-employment allowance. The allowance is funded from the state budget and the European Social Fund and does not have to be repaid. The condition is that the self-employed activity must be carried on continuously for at least 2 years.
The allowance is granted by the Office of Labour, Social Affairs and Family in whose district the self-employment position is created. It may be used only to cover costs related to the self-employed activity set out in the business plan, and must be used in the period from the date the signed agreement takes effect until the end of the commitment to carry on the self-employed activity. Its amount depends on the average registered unemployment rate in the district.
The use of the allowance must be verifiable and recorded in the accounts for a period of ten years after the end of the commitment to carry on the self-employed activity. If the entrepreneur ceases the activity early and does not carry it on continuously for two years, they must repay a proportionate part of the allowance for the period during which the activity was not carried on.