No. 135 | Year XII
This June, Private Briefing brings analyses of some of the key support programs for local entrepreneurs and farmers, including investment loans and working capital loans from the Development Fund, as well as loans for equipment and storage from the Provincial Fund for Agriculture. Both target essential long-term improvements, increasing sustainability. Additionally, we analyse the ongoing Innovation Voucher program and provide further insight into the current call within Measure 1 of the IPARD III Program, whose application deadline has been extended.
// This year’s programs from the Provincial Fund for Agricultural Development offer numerous opportunities for business improvement, agricultural production development, and competitiveness of farms in Vojvodina through a series of tailored financing models designed to enhance growth. We analyse two calls that provide significant financial support opportunities for constructing facilities and purchasing equipment for grain, fruit, and vegetable storage, as well as for investments in physical assets of farms in the fruit and vegetable processing sector. Loan amounts range from 300,000 to 7 million dinars, suggesting that the expected beneficiaries are predominantly micro and small farms. The repayment period is up to 5 years, with an interest rate of 1% with a currency clause, and a grace period of 12 months during which no interest is calculated. Repayments come in semi-annual instalments, with the first instalment payable after the grace period. Acceptable collateral includes mortgages on residential or commercial properties in larger cities and municipalities in the province, as well as on the land of farms applying for the program and support.
// The goal of the program for the construction of facilities and purchase of equipment for storage is to provide financial resources for building facilities and equipping silos, floor warehouses, and cold storage to create conditions for intensifying agricultural production and increasing the competitiveness of individual farms. The second program includes loans for purchasing equipment and machinery for production. The scope of purposes is very broad and covers numerous needs that can affect production efficiency.
// The purposes of storage and purchasing equipment for the production and processing of products allow production to be improved so that the level of processing is raised from primary, basic production, and enables farms to manage their profitability efficiently by using the opportunity to place goods on the market at the right time, thanks to storage capacities. All this is supported by extremely favourable credit conditions, including low interest rates, an adequate repayment period, while amounts are tailored to small farms, which are mostly faced with challenges in obtaining funds for key improvements and advancing to new business levels. The cost of borrowing, which is significantly lower than the most favourable commercial terms, leads to the further strengthening of the beneficiaries’ financial structure by reducing potential indebtedness and financial burden. Considering that these are investments in new machines and equipment, the potential modernization and consequent capacity strengthening is an additional aspect of increasing productivity, efficiency, and therefore profitability. Given global trends and developments in primary agricultural product markets, investments in strengthening and developing capacities are not only a good but also a necessary strategy for the development and sustainability of agriculture in the coming period. Therefore, this program is certainly one that deserves attention and recommendation.
// A recently published analysis of financial statements for companies and entrepreneurs by the Serbian Business Registers Agency indicates that business profitability has increased by more than 12%, with revenue growth of just under 3%, reflecting adaptability to market conditions and the exploitation of emerging opportunities. On the other hand, the results of the balance sheet indicators for the past year are not yet available, while the previous analysis shows that the net working capital of companies was 480 million euros, and for full coverage of inventory, the industry lacked about 27 billion euros of long-term capital. In such an environment, where access to medium or long-term financing sources for SMEs is limited due to the lack of adequate collateral for loans provided by commercial financial institutions, support in the form of financing fixed assets and long-term working capital, with security in the form of promissory notes or equipment pledges, is extremely significant. This is precisely the type of incentive for overall business sustainability provided by the Development Fund (DFR) programs, in the form of investment loans and long-term working capital loans. The program aligns with the DFR’s purpose of facilitating access and broader availability of development financing for micro, small, medium, and large legal entities, as well as entrepreneurs, with significantly more favorable lending conditions than the market average.
DF investment loans enable the purchase or construction of business and production facilities, and the acquisition of machinery, plants, and equipment. Acceptable loan amounts range from 1 million to 250 million dinars, depending on the applicant’s business performance and collateral. The repayment period is up to ten years, including a one-year grace period, with an annual interest rate of 1.5% secured by a bank guarantee, or 2.5% with other collateral. Loan amounts for long-term working capital also depend
on the creditworthiness of the user and the offered collateral. Interest rates are the same for all users, regardless of legal form, ranging from 1.8% per year if the collateral is a bank guarantee, to 2.8% with a currency clause. The loan term is up to 4 years, including a grace period of up to 6 months, and repayment is monthly. For both types of loans, in addition to a bank guarantee, acceptable collateral includes promissory notes from individuals and legal entities, equipment pledges, and mortgages on real estate.
Both long-term working capital and investments in fixed assets represent resources necessary for effectively improving the business activities of users, whose role can be analyzed from several aspects. The first is maintaining business continuity and increasing competitive ability, as they primarily provide stability, planned operations, and significant expansion of capacities and production volume. This is achieved through the expansion of production capacities with new equipment or production facilities, which are the subject of investment loans, as well as through increasing the quantity of raw materials or goods in the case of long-term working capital, which improves the company’s position with suppliers and reduces costs, thus impacting profitability and capital accumulation for new growth and development phases. An additional aspect is increasing the company’s capacity to manage risks, including unexpected costs, price fluctuations of raw materials, or market changes.
// The purpose of investment loans and long-term working capital loans, with well-measured repayment periods of 4 and 10 years respectively, and favorable interest rates, makes this financing option a favorable solution for financing investment plans or current obligations of end users, which can have a significant effect on the long-term improvement of capacities and competitiveness. A prerequisite for achieving these goals is a good investment plan with a careful analysis of the economic framework and market potential. These parameters are provided within the business plan, which is an integral part of the application documentation for the Fund, but also represent a fundamental prerequisite for the proper realization of planned investments and achieving desired effects. For the quality preparation of the business plan and the entire application, as well as efficient financial management, cooperation with consultants with long-term experience in preparing projects for Fund support and corporate financial management can certainly be beneficial.
// The Innovation Fund regularly opens cycles of the Innovation Vouchers Program, under which 120 million dinars have been allocated in the current call for co-financing innovations in the economy. Innovation vouchers are a relatively simple and direct financial incentive model that allows SMEs to use the services of the research sector to increase the innovativeness of their products and become more competitive in the market. The creativity, vision, and agility that characterize entrepreneurs are often not enough to realize innovative ideas due to the lack of capacity for research and development or the significant cost of financing external research that can lead to a qualitative leap in terms of innovation and market sustainability of their services and products. Innovation vouchers aim to bridge this gap, as SMEs that apply can use them to develop new or improve existing products, processes, or services, proof of concept or feasibility studies, production of laboratory or demonstration prototypes, technology verification and improvements, advisory services related to innovation activities, development and introduction of special software for product or process development, or training related to the development of technological solutions.
The program has undergone several improvements over time to increase its effectiveness and impact. In the current call, the Fund’s participation has been reduced from 80% to 60%, but the voucher amount limit per applicant has been doubled from the previous maximum of 1,200,000 to 2,400,000 dinars. The deadline for service implementation is up to 6 months, and qualified voucher users are SMEs registered with
the SBRA, headquartered in Serbia, and majority privately owned, while qualified service providers are public and private accredited R&D organizations, of which there are currently 208 in Serbia. Calls are always active until the total allocated funding amount for the cycle is exhausted. Applications are processed on a first-come, first-served basis, and the approval deadline is up to 7 days.
The changes that have accompanied the program cycles testify that the economy has recognized innovation vouchers as a tool for increasing innovation capacity and a way to improve their own competitiveness. The increasing pace of fund utilization from cycle to cycle confirms that entrepreneurs are not lacking ideas and the desire to raise their level of success and innovation. On the other hand, it shows that the scientific research community is ready and eager to get involved in solving concrete, applicable issues in the context of raising the innovation competitiveness of the economy.
// Innovation vouchers are just one of the support models for the economy implemented through the Innovation Fund, within the concept of state support for innovations in the SME sector, which involves strengthening the capacity of the economy through technological improvements with the help of R&D organisations. In addition to the Innovation Fund, there are other sources of innovation support, their number is continuously increasing, and we regularly analyse them through Private Briefing. This testifies that innovations are recognized as a way to increase the general capacity and competitiveness of the economy, and on the other hand, that there is no lack of quality ideas. Through practice, we had the opportunity to verify that this is true, but also that the gap between the idea and a coherent business plan is often a huge obstacle to the materialization of innovation. Bridging the gap between the idea and its realization is possible by using a set of techniques that allow the innovator to think like an investor. Whether it is a public investor like the IF, another local or international support program, a venture capital fund, or a private investor, an innovative product and idea open doors, convincing presentation is significant, but the key is in financial engineering. The methodology of elaboration, from the idea through market assessment, internal analysis to quantification of potential, cash flow projection, return on investment estimation, and exit strategy is the foundation and necessary condition for effective negotiations with professional investors and securing funding. Glenfield consultants, with decades of experience in analysing innovative ideas and transforming them into quantitative models, are available through these calls to help innovators maximize their chances for funding and market success. Learn how with a special bonus package available to Private Briefing readers. Send inquiries to office@glenfield.rs, subject “Innovations.”.
// The IPARD call under Measure 1 – Investments in Physical Assets of Agricultural Holdings, is the first in a series of calls in the new cycle, and although it was supposed to be open until mid-month, the deadline for submission has been extended to July 26th. Besides the new measures, IPARD III also brings an expansion of the sectors supported through the program, including fisheries, grain processing, and industrial crops, with a particular emphasis on rural tourism, direct sales of agricultural and local products, as well as services in rural areas.
With a total budget of 4.8 billion dinars, which can cover up to two-thirds of the investment value, the current call under Measure 1 can generate significant incentives for improvements and transitioning agricultural producers to a new level of competitiveness and efficiency. Qualified beneficiaries are natural persons – heads of commercial family farms, entrepreneurs, companies, and agricultural cooperatives, and applicants must have proof of professional knowledge or experience in agriculture, which can be demonstrated with appropriate certificates or work experience confirmations in the sector.
The call brings a significantly expanded support model for farmers, with the possibility of financing various types of investments, including the construction and equipping of facilities in primary agricultural production, as well as the establishment of production and mother orchards and vineyards. The amount of support varies from 60% to 75% of eligible investment costs, depending on several factors, including the status of a young farmer, organic production, the location of the farm, and the type of investment. This indicates targeted support that promotes sustainable practices and supports specific groups of producers.
// The expansion of the scope and introduction of new sectors show that the IPARD III program continues with diversification. An important innovation in the entire program, and in this call under Measure 1, is that the special conditions related to the production sector are considered at the end of the investment, instead of at the beginning, which was the case earlier. This change should facilitate more users in achieving support. Additionally, the broadly set list of eligible investments and costs, as well as the introduction of support possibilities for new technologies such as agricultural drones or specialized vehicles, signals that the program remains open to an increasingly wide range of projects, giving users significant freedom in planning and implementing improvements they recognize as crucial for realizing their development plans. With IPARD now in its third iteration, a significant set of experiences has been gathered from previous calls, including the most common mistakes in application preparation. These certainly include the submission of incomplete project documentation, as well as the lack of detailed analysis and self-assessment. To avoid these, a careful analysis of the requirements and understanding of the specific conditions related to the sector in which the investment is being made is necessary, along with an assessment of the capacity to carry out the planned activities. Our team of experts is at your disposal for advice and support, from the preparation of project documentation to the implementation of the investment, to help you take advantage of the support that IPARD provides. In addition, we are available for initial needs analysis processes and for securing the necessary pre-financing.
KEY ECONOMIC INDICATORS | Jun - 24 | |
---|---|---|
1 | Annual inflation | 5.00% |
2 | Reference interest rate | 6.25% |
3 | Unemployment rate | 9.40% |
4 | Average net salary - RSD | 96,614 |
5 | Average pension - RSD | 45,732 |
6 | Exchange rate RSD/EUR | |
On the last day of the month | 117.1015 | |
Average exchange rate for the month | 117.1154 | |
7 | Exchange rate RSD/USD | |
On the last day of the month | 108.2096 | |
Average exchange rate for the month | 108.4631 |
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