How to Obtain Loans Where Only Half of the Money Needs to Be Repaid?

When non-repayable funds are mentioned, European funds are the first thing that comes to mind for most entrepreneurs. However, this source of money will not last forever, and loans with partial principal write-off, or capital rebates, represent an alternative. Currently, loans for business modernization are available, offering write-offs of up to half of the principal. Such loans should be of interest to all companies intending to invest in the robotization and digitalization of their operations.

The Ministry of Regional Development and European Union Funds has entrusted the Croatian Bank for Reconstruction and Development (HBOR) with the implementation of the financial instrument ‘Loans for Production Modernization’, for which funds are provided by the European Regional Development Fund (ERDF) and HBOR.

In a relatively short time, these loans have already been well recognized among entrepreneurs, as indicated by HBOR’s response to Lider’s inquiry about interest. The bank highlights that, in the current phase of this program, a total of 85 loan applications worth nearly 100 million euros have been received, which constitutes almost 60 percent of the total allocation planned for this program.

– Of the mentioned number, HBOR has so far approved 15 loan applications, with a total volume of 13.52 million euros. The average requested loan amount is 1.16 million euros, taking into account already approved projects as well as those still in processing – the bank states.

Three Criteria

Regarding the criteria for approving capital rebates, or the possibility of writing off up to 50 percent of the loan principal, HBOR emphasizes that they are related to the introduction of new technologies and digital solutions into the overall business, or the procurement of solutions that will automate and robotize production and/or business processes. – The mentioned solutions can be related to Industry 4.0 and/or the digitalization and digital transformation of processes, as well as the smart specialization strategy (S3) – HBOR asserts.

In practice, this means that a client, or applicant, seeking a loan amount of 100 thousand euros must have an item of equipment/machinery within the investment structure, whose procurement cost constitutes at least ten percent of the loan principal (i.e., at least 10 thousand euros), and which has been confirmed by an authorized court expert to meet the solutions related to Industry 4.0. This applies to Criterion A, the first of three criteria.

Criterion B pertains to the digitalization and digital transformation of business, and under it, it is possible to achieve a two percent capital rebate for each individual solution, regardless of the procurement cost. – For example, if a client introduces a digital signature worth 100 euros into their business, they can achieve a two percent capital rebate for its implementation. It should be emphasized that a Statement from an authorized court expert in the relevant field of expertise is also required to confirm that the investment meets the Digitalization criterion – HBOR representatives state.

Recognized Among Entrepreneurs

According to Criterion C, related to the Smart Specialization Strategy (S3), it is necessary for the client to confirm and justify that their investment (under A and/or B) contributes to one of the seven thematically prioritized areas of the S3 strategy. By satisfying this criterion, they can achieve a five percent capital rebate (in this criterion, a maximum of five percent rebate can be awarded, regardless of the number of thematically prioritized areas to which the investment contributes).

Finally, considering the number of applications received so far, HBOR believes it is evident that entrepreneurs have recognized this type of financial instrument as a good opportunity for new investments and as an effective and favorable source of financing. – This was also evident through the first financial instrument aimed at the private sector – Loans for Sustainable Tourism, which was launched at the end of last year and was related to the tourism sector, where the number of applications exceeded the planned allocation – emphasizes the domestic development bank.

Additionally, HBOR announces that preparations are underway to launch another financial instrument based on the same model (the possibility of capital rebates, or write-offs of up to 50 percent of the loan principal), which will focus on investments in energy efficiency, or energy savings and/or renewable energy measures. The new program will be implemented through commercial banks.