Often, the business loan application process can be considered complex. Below, we suggest key points that should be addressed as part of the process.

Also, reading and understanding the essential content of your Formal Business Plan aiming to secure a Business Loan, for either an existing enterprise or a Start-up, would be very helpful.

Further, you can check out some of the available Financial Instruments that can help you secure a reduced/ subsidised interest rate.

Contact us for support in assessing your Business Planning needs, and for the Preparation and Implementation of the appropriate Business Plan for your enterprise. Additionally, we can support you in utilising a suitable Financial Instrument.

Bank Requirements for a Business Loan Application
You should note that when applying for a business loan, the Bank usually requires a study that documents the viability of the applicant enterprise and, of course, the ability of the organisation to repay the loan for which it is applying.

The content of the study to be requested by the Bank may vary, as a result of various factors such as, whether it concerns an existing business or a Start-up, the business sector and the activities of the applicant enterprise, the loan amount and of course the policies of the specific Banking Institution.

The Bank may request a Business Plan, a Feasibility Study, a Viability Study, or another study. Still, note that usually the content of the Study is the same/ similar but different Banks may call it with a different name. Reading the requirements for each of the Sections of a Formal Business Plan will provide adequate insight for any study that may be requested by a Banking Institution.

Before deciding to apply for a business loan, you should be aware that no Bank assumes significant risks for the business plans/ activities of its clients.

Thus, in order to stimulate the interest of bankers, a Formal Business Plan addressed to a Bank in order to secure a business loan should emphasise the following points, which underline stability, assets in the balance sheet and financial history, showing that the loan is not particularly risky.

• Description of your personal/ enterprise net worth (depending on whether the loan concerns an existing business or Start-up). Bankers want to see the personal net worth of business owners and/ or business value.
• Be transparent about your financial history and bank assets. Bankers want to see the financial history and available banking assets.
• Provide information supporting business stability and long-term continuity. Bankers assess future stability prospects and borrowers’ solvency.

Business Loan Application Procedure

• As a first step of the application process you should contact your bank and/ or any other Banking Institution of your preference and ask what specific documentation you will be required to submit as part of your application.

Note that, if you have not yet decided to proceed with a specific Banking Institution, we can offer support in communicating and exploring the best business option.

During this first step you will be asked to provide answers to questions concerning your Ability to repay the loan requested, such as:

• Which specific documents will be required as part of the application process?
• Thorough responses to the following questions:
  • Purpose of the Loan: How will the funds (loan) be used?
  • What is the Amount of the Loan: How much money do you want to borrow? Why is that the appropriate amount?
  • Loan Duration and Repayment Plan: For how long will you need the money and what is your specific repayment plan?
  • Collateral: What assets, whether personal or owned by the applicant business, are you intending to use as collateral for the loan? What is their market value? What part of their value can you use as collateral?
  • The Formal Business Plan: The bank will ask for a Business Plan/ Feasibility Study, a Viability Study/ Technoeconomic Study or some other study, of which the content should be adapted according to the requirements of the specific Banking Institution and the nature/ purpose of the loan. Note that, at this point of the application process, for our clients, we suggest that we should communicate directly with their Bank, always involving the client in the communication, so that all points are adequately clarified in order for the content of the study to fully satisfy the requirements of the Bank.
  • For existing Businesses the Bank will expect to see:
    • Recent Audited Financial Statements: For information on your company's financial performance history.
    • Your Balance Sheet
    • Your Income Statement/ Profit and Loss Statement - P&L.
    • Other information that may be required: Information about you, e.g. other loans you may have, loans for which you are a guarantor, assets that you will commit as collateral for the loan, guarantors for your loan.

 

• Once your Bank establishes that there is a positive prospect for approving your loan you, you may proceed to the second step of the application process, which involves:
  • Submit all required documents and information to your bank/ bank of your preference.
  • We prepare and deliver to you the study, as required by the specific banking institution, with its content adjusted according to the requirements determined during the first step of your application.

Financial Instruments for securing reduced/ subsidised interest rate
Depending on how the characteristics of your enterprise compare to specific parameters put forward by different Financial Instruments, your enterprise could utilise an available Financial Instrument in order to secure reduced/ subsidised interest rate.

Below, you can read basic information in relation to three of the currently available Financial Instruments.

Contact us for support in assessing your Business Planning needs, and for the Preparation and Implementation of the appropriate Business Plan for your enterprise. Additionally, we can support you in utilising a suitable Financial Instrument. 

• Provision of Low-interest rate Loans through the European Investment Bank (EIB).

This Financial Instrument is available through various Banking Institutions in Cyprus. You can see all Banking Institutions through which this Financial Instrument is provided in Cyprus, on the EIB website, by clicking here.

Below you can refer to some indicative basic provisions of the specific programme, as determined by various Banking Institutions providing the specific Financial Instrument. For fuller and accurate information, you should first decide on the Banking Institution of your preference and then, provided the bank offers this specific Financial Instrument, discuss with the specific bank its utilisation for your enterprise, given it is still available.

Financial (Interest rate) advantage
The financial advantage to borrowers will amount to at least 100 basis points (1%) per year compared to the interest rate they would receive for the same loan without the EIB's participation. Additionally, borrowers who meet the youth employment criteria will benefit from an additional financial advantage of 50 basis points interest rate (0.50%).

Jobs for young people
In order to benefit from a financial advantage totalling 150 basis points (1.50%), borrowers will have to meet one of the following:

• The final beneficiary confirms that during the last six months he or she has hired and continuous to employ or intends to recruit in the next six (6) months at least one (1) [or five (5) young people for Mid-Cap's] young person aged under specified limit, as determined by the Bank with whom you will cooperate. The period is calculated from the date the loan agreement with the Bank was signed.
• The borrower offers vocational training for young people or internships/ training programmes for young people.
• The borrower has an active cooperation agreement in place, with a technical college or school or university, to employ young people.
• During the last 6 months, the borrower has been involved in a youth entrepreneurship programme offered by a non-governmental organisation or educational institution or plans to participate in such a programme during the next 6 months.

Eligibility Criteria
Enterprises eligible for funding:

• Small and medium-sized enterprises (SME's) with up to 250 full-time employees,
• Mid-Cap's companies with a total number of full-time employees ranging from 250 to 3,000.
  • Family businesses, personal companies and associations engaged in economic activity are included.
  • Self-employed persons may also be included, provided they are registered in a business register and are registered with the VAT authorities.

Beneficiaries
SME's and Mid-Cap's operating in any sector, excluding the following:

• The production of arms and ammunition, military or police equipment or infrastructure and supply or infrastructure that restricts human rights and freedoms or violates human rights,
• Activities aimed at producing or facilitating the use of gambling and related equipment,
• Tobacco production, processing and distribution, or the distribution of specialised tobacco products and activities facilitating the use of tobacco,
• Activities concerning live animals for experimental and scientific purposes that their compliance with the "Council of Europe Convention for the protection of vertebrate animals used for experimental and other scientific purposes" cannot be guaranteed,
• Activities that are considered morally and ethically controversial (e.g. research on human cloning),
• The purchase of intangible assets that could lead to or impose a strong market position for the final beneficiary (i.e., a market share of more than 20% of the relevant market) or the purchase of loans or the purchase of rights to exploit mineral wealth,
• Activities that have a negative impact on the environment and are not mitigated,
• Activities constituting pure real estate purchase and development,
• Activities that are purely financial transactions,
• Financial holding companies as well as leasing companies are also excluded.

Funding Purposes
Funding of investments and expenditures that have as their main objective the development of investments and in particular:

• Purchase, renovation or extension of assets for own use. The purchase of land is excluded, unless deemed necessary to complete the investment,
• Investing in intangible assets. This includes the costs of development, design and financing during the construction of an asset, research and development costs, fees, gross wages directly linked to research, development and business renewal, the establishment of distribution networks in the domestic market or other markets within the European Union, including the acquisition of assets and/ or trade names as well as patents/ licenses and other intellectual property protection considered necessary for the technical implementation of the project,
• Change in generation or business change associated with the staff, which allows the business to continue to operate. It is important to note that both the buyer and the firm to be sold should be eligible firms and the total financing need not to exceed € 5m (excluding own funds),
• Refinancing existing lending (conditional),
• Coverage of financing needs arising from the business activities of the final beneficiaries, including working capital loans.

 

• “InnovFin” - European Union funding, through the European Investment Bank (EIB), for those who innovate

“InnovFin” is another financial tool available through various Banking Institutions in Cyprus. You can see all Banking Institutions through which “InnovFin” is provided in Cyprus, on the EIB website, by clicking, here.

According to the “InnovFin” website, “InnovFin financing tools cover a wide range of loans, guarantees and equity-type funding, which can be tailored to innovators’ needs. Financing is either provided directly or via a financial intermediary, most usually a bank or a fund.”

You can click, here, to read more about available “InnovFin” products and who can benefit from them.

For more information, your needs and characteristics should be discussed, as part of your potential application, with the Banking Institution of your preference, given that the particular Bank offers “InnovFin”.

 

• Subsidy Scheme for the Professional Development of New Scientists, by the “Central Agency of Equal Weight Distribution”

This Subsidy Scheme concerns relatively smaller subsidy amounts, compared to the two tools outlined above, and is targeted towards “Young Scientists” interested in initiating professional activity.

"The business loans granted will be through funds from the “Central Agency of Equal Weight Distribution” and will be up to € 25,000 for young scientists up to 40 years of age.

The Subsidy Scheme is addressed to eligible persons, new scientists who are about to set up their own business and the loan to be granted will involve the purchase of the necessary equipment for the pursuit of the profession of the applicant.”

For more information, you can visit the “Central Agency's” website by clicking, here, or you can visit the website  of the Directorate-General for European Programmes, Coordination and Development.

Contact us for support in assessing your Business Planning needs, and for the Preparation and Implementation of the appropriate Business Plan for your enterprise. Additionally, we can support you in utilising a suitable Financial Instrument.