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Establishment and Management of a Guarantee Fund for the Devin Area
Devin Business Center
Background
The Devin Area Guarantee Fund was established in 1999. It was as a part of a UNDP/National Employment Service project on creating economic opportunities for women in the Devin area. The Fund s goal is to help women-owned companies or small family businesses get bank loans, as well as to change banks attitude to this sector. The Fund provides collateral (guarantees) that would be deemed sufficient by the bank to finance small companies, both start-ups and existing ones.
The Devin Area Guarantee Fund was established in 1999. It was as a part of a UNDP/National Employment Service project on creating economic opportunities for women in the Devin area. The Fund s goal is to help women-owned companies or small family businesses get bank loans, as well as to change banks attitude to this sector. The Fund provides collateral (guarantees) that would be deemed sufficient by the bank to finance small companies, both start-ups and existing ones.
Practice
Capital and loan size
The Devin Area Guarantee Fund is managed by the Devin Business Center. Apart from guarantees on loans, its also provides additional services, such as business training and consulting. The training on the basics of marketing, finance, business planning, loan applications, financial control and loan payments, provided by the Fund to SME owners, is an important part of the Fund s support. The Fund s capital is $35,000 or DEM 62,390. As stipulated by banking legislation, the guarantees for the type of loans that are granted in Devin must cover 105% of the loan amount and the interest due, in case that the guarantee is in Leva or DEM. The Devin Business Center provides guarantees for loans from $500 to $3,000, denominated in Leva. The interest is the basic rate plus 5 percentage points.
Who is eligible for Fund support?
Any company that is owned by a woman or that is a small family business, sole-proprietorship or LLC, and that is operating in the Devin area, is eligible for Fund support. The eligibility criteria may be obtained from the Devin Business Center. All applicants must enter a 40-hour course on marketing, finance and business planning and get at least 80 points on the post-training test (the maximum number of points is 1000). The course is organized and facilitated by the Devin Business Center. Companies whose operations guarantee highest growth and quality of jobs created will be preferred.
Why is the Devin Area Guarantee Fund successful?
The project meets the existing need of micro credits;
The Devin Business Center and the Devin office of the United Bulgarian Bank have established a successful partnership;
The Business Center is actively involved with clients in helping them to develop their ideas;
The mandatory 40-hour business course for loan applicants;
The Devin Business Center helps the applicants write their business plans;
The Business Center maintains contact with the clients and provides business services before and after the funding is approved.
Capital and loan size
The Devin Area Guarantee Fund is managed by the Devin Business Center. Apart from guarantees on loans, its also provides additional services, such as business training and consulting. The training on the basics of marketing, finance, business planning, loan applications, financial control and loan payments, provided by the Fund to SME owners, is an important part of the Fund s support. The Fund s capital is $35,000 or DEM 62,390. As stipulated by banking legislation, the guarantees for the type of loans that are granted in Devin must cover 105% of the loan amount and the interest due, in case that the guarantee is in Leva or DEM. The Devin Business Center provides guarantees for loans from $500 to $3,000, denominated in Leva. The interest is the basic rate plus 5 percentage points.
Who is eligible for Fund support?
Any company that is owned by a woman or that is a small family business, sole-proprietorship or LLC, and that is operating in the Devin area, is eligible for Fund support. The eligibility criteria may be obtained from the Devin Business Center. All applicants must enter a 40-hour course on marketing, finance and business planning and get at least 80 points on the post-training test (the maximum number of points is 1000). The course is organized and facilitated by the Devin Business Center. Companies whose operations guarantee highest growth and quality of jobs created will be preferred.
Why is the Devin Area Guarantee Fund successful?
The project meets the existing need of micro credits;
The Devin Business Center and the Devin office of the United Bulgarian Bank have established a successful partnership;
The Business Center is actively involved with clients in helping them to develop their ideas;
The mandatory 40-hour business course for loan applicants;
The Devin Business Center helps the applicants write their business plans;
The Business Center maintains contact with the clients and provides business services before and after the funding is approved.
Results
So far, the Fund has guaranteed 12 loans. The companies funded have established 64 new long-term jobs. Two women-owned companies have been registered and are operational. 50% of clients are women and 50% own family businesses. The loan beneficiaries portfolio is divided as follows: tourism companies 30%; production and processing companies 50%; trading companies 20%. All loans have been paid back in time. At present, default rate is zero. Only 20% of the companies have used a grace period.
So far, the Fund has guaranteed 12 loans. The companies funded have established 64 new long-term jobs. Two women-owned companies have been registered and are operational. 50% of clients are women and 50% own family businesses. The loan beneficiaries portfolio is divided as follows: tourism companies 30%; production and processing companies 50%; trading companies 20%. All loans have been paid back in time. At present, default rate is zero. Only 20% of the companies have used a grace period.
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