Ukraine is preparing preferential loans for big business

Ukraine is preparing to launch a mechanism for preferential financing for large businesses. State support should cover companies in the retail, logistics, trade and processing industries, in particular, enterprises that have lost warehouses, production facilities and other assets due to Russian shelling. Banks are already preparing to join the program.

The issue of access to financing for large businesses has become particularly relevant after a series of Russian attacks on warehouses, distribution centers and production facilities.

The government has extended state support to projects in the fuel and warehouse logistics, trade and processing industries. At the same time, in order to actually receive a loan, companies will have to undergo a bank assessment.

Which companies will be able to apply for financing

The pilot project of state support provides for financing for companies that build or renovate facilities in:

distributed generation;

fuel logistics;

warehouse logistics;

processing industry;
wholesale and retail trade.

Ukrgasbank has already announced its intention to join the program. The bank reported that it has submitted the necessary documents to the National Development Agency.

The terms of financing large retail and logistics companies will be determined directly by the parameters of the state program. This includes, in particular, the base interest rate and the amount of its compensation.

However, there will be no single conditions for all borrowers. The level of loan security will be determined individually depending on the financial condition and rating of the company, as well as the characteristics of a specific project.

A single preferential rate will not be enough

Compensation of interest can make the loan cheaper, but the main problem during war remains the risk of repeated destruction of assets.

A company can receive a loan, rebuild a warehouse or production facility, and after new shelling, again lose the asset that was supposed to generate income to repay the loan.

That is why large-scale business lending requires additional mechanisms — state and international guarantees, war risk insurance, and risk sharing between program participants.

The government has already expanded the current war risk insurance program for businesses and simplified the mechanism for receiving compensation.

What to do for a business that lost collateral due to shelling

A separate problem remains securing loans.

If a warehouse, production facility, or equipment was destroyed as a result of a Russian attack, the company may no longer have enough classic collateral to obtain new financing.

At the same time, banks are considering the possibility of taking into account not only real estate, transport, or equipment.

In particular, collateral can be property rights to funds, goods, and finished products. The deficit in physical collateral can also be partially compensated for by state individual and portfolio guarantees, guarantees from foreign banks, and mechanisms for joint risk sharing with international financial organizations.

This is especially important for large retailers and manufacturers. Even after the loss of the warehouse, the company can retain contracts, product flows, receivables and forecasted revenue.

NBU changed the approach to securing loans

The National Bank has already created additional opportunities for lending to businesses.

Banks are allowed to consider property rights to funds for already shipped goods, performed work or provided services as acceptable collateral.

In fact, this refers to the possibility of financing for confirmed receivables, and not for forecasted future sales.

In addition, against the background of increasing attacks on production and warehouse facilities, the NBU recommended that banks not stop lending to viable enterprises affected by shelling. The regulator also approved two packages of relevant changes.

What banks will check

The mere fact of a business’s participation in the industry envisaged by the program will not mean automatic receipt of a loan.

Banks must assess:

viability of the business model;

the company’s ability to repay the loan;

the amount of the business’s own participation;
the quality of the proposed collateral;
project parameters;
the risk of repeated destruction of the financed asset.

Thus, the final lending conditions will depend on the specific company and project.

What should be the model of preferential lending

The Association of Ukrainian Banks believes that the mechanism should combine affordable financing with a clear distribution of risks between business, banks, the state and international partners.

Possible components include long-term banking resources, partial compensation of the interest rate, state and international portfolio guarantees, war risk insurance and risk-sharing mechanisms.

At the same time, the state should establish transparent selection criteria and compensation parameters, international partners should provide long-term resources and risk-sharing mechanisms, banks should conduct an independent assessment of borrowers, and companies should confirm losses and provide realistic recovery plans.

At the first stage, a special role is assigned to state-owned banks, which already have experience in implementing support programs and cooperation.