Business loans may become cheaper in Ukraine

28 March 2024 16:20

In April-June, interest rates on targeted bank loans for small and medium-sized businesses, excluding preferential government programmes, may drop to 15-17% per annum. This was reported by Oksana Shulga, director of the small and medium-sized business department of Globus Bank, Komersant ukrainskyi reports.

According to the expert, the main incentive to improve lending conditions is a gradual reduction in the discount rate. In her opinion, within 2-3 months, the National Bank may reduce the discount rate from the current 14.5% to 14-13%, which will allow banks to more actively develop lending to small and medium-sized businesses on more favourable terms.

“The development of bank lending is actually “tied” to the size of the discount rate. After all, the discount rate actually fixes the current value of the national currency and the cost of financial resources raised for the development of lending. That is why the lower the discount rate, the more favourable the conditions for borrowers will be,”

– emphasised Oksana Shulga.

The expert noted that in the first quarter of 2024, the number of targeted loans issued to SMEs (small and medium-sized businesses) almost doubled compared to the same period last year. At the same time, more than 90% of all loans issued to SMEs are joint programmes of banks and manufacturers/suppliers of fixed assets.

She pointed out that since the beginning of 2024, the greatest demand has been for loans to purchase cars for business (more than 40% of all loans to small and medium-sized businesses), purchase of commercial equipment (about 30% of all loans to SMEs), and production equipment (25% of loans). At the same time, the most common (over 95% of loans) are loans with a maturity of 3-5 years and an average loan amount of up to UAH 1.2 million.

“Government programmes to support small and medium-sized businesses, such as 5-7-9, Affordable Factoring, Affordable Financial Leasing 5-7-9%, are an important basis for banks to develop their own lending programmes. It is still too early to say that commercial banks will be able to offer competitive lending terms for small and medium-sized businesses. The main advantage of bank programmes compared to government programmes is their targeted focus on the purchase of specific machinery, transport or equipment through joint programmes with manufacturers/suppliers of fixed assets, as well as the optimal ratio of the amount and term of lending: up to UAH 2-3 million for up to 5 years with monthly repayments,”

– the banker emphasised.

The expert believes that in the second quarter the popularity of bank loans for small and medium-sized businesses will only gain momentum. The optimal result for those banks that are developing SME lending will be 50-60 loans issued monthly for a total amount of over UAH 80 million.

“At present, only ⅓ of all commercial banks provide SMEs with appropriate loans outside the framework of government loan programmes. However, the favourable situation in the country’s economy and the “liberal” discount rate can significantly affect this type of lending,”

– Oksana Shulga summed up.