Access to finance
Access to EU finance
This site will help you to apply for finance supported by the European Union. To access EU finance, click on your country to locate banks or venture capital funds that provide finance supported by the EU:
National sources of finance
Funds covering the start-up capital needed to begin an activity may come from:
- self financing (yours or your partners' resources);
- public sources (subsidy and grant programmes of central and regional authorities);
- private sector funding (i.e. bank credits, loans, leasing).
Another source of financing is legally-determined depreciation. Depreciation is even more favourable than profit as it is not subject to taxation. The issue of depreciation is handled under the Income Tax Act.
Public support for business entities is divided into indirect support (investment incentives, tax relief) and direct support (subsidies, grants).
Investors launching a new product or extending an existing product in the area of processing industry may, for investments exceeding CZK 50 million obtain investment incentives under the Investment Incentives Act.
Another form of indirect state support especially for export activities of small and medium-sized businesses is to use the services of the Export Guarantee and Insurance Company (EGAP).
Its main mission is to insure export credit against territorial and commercial risks related to the export of goods and services from the Czech Republic.
Indirect support is also provided in the Czech Republic by the Czech Export Bank (CEB). The CEB supplements the services offered by domestic banks with the funding of export operations requiring long-term sources of finance.
Direct support in the form of various subsidy programmes and grants is provided both by central bodies, represented mainly by the ministries, and by regional bodies, mainly the regional authorities.
The most accessible subsidy programmes for businesses are provided by the following ministries:
Support programmes financed from the national budget of the Czech Republic and from other sources involve mainly small and medium-sized businesses, agriculture, R&D, energy saving and housing support.
Small and medium-sized businesses may also use funding provided at a regional level. The provision of these financial resources is usually conditional, among other things, on the company having its head office in a given region.
Access to EU funding
In order to make use of EU funds in the years 2007-2013 the Czech Republic is preparing a total of 24 operational programmes for the newly-conceived 3 Objectives of the EU's Economic and Social Cohesion Policy.
For business entities there is mainly Objective 1, entitled "Convergence." Information is available on the following websites concerning its various operational programmes.
The database on support and grants for businesses includes grants from European funds, from the Czech national budget and support provided by the regions and other entities. The database is regularly updated and allows easy searching with the selected criteria.
Finance from private sources mainly involves bank loans and leasing.
The mandatory documentation for a bank loan application includes:
- accounting statements,
- a business plan (n the case of start-ups).
Banks require a short-term asset guarantee for the provision of short-term loans and a bill of exchange for long-term loans. Loan conditions vary according to the amount required, the overall financial situation and the business plan.
The most frequent type of business credit is the deferred payment. The concrete terms under which it is possible to secure bank credit vary for individual banks and non-bank institutions. Information can be obtained at the institution in question.
There are two different types of leasing:
- operative, when you lease an item for a period shorter than the useful life of the leased item,
- leaseback, when a leasing company purchases from you the item of the lease and then leases it back to you on the basis of a leasing contract. It is basically used to free up financial resources for other purposes.
These are a form of debt security. When you issue a bond to someone you are obliged to pay him/her interest and/or to repay the principal at a later date. Re-payment conditions depend on the bond's specific terms. Bond interest rates are not taxed.
This is a financial transaction where you sell your company's account receivables (i.e. invoices) at a discount. Unlike bank loans, factoring involves three parties:
- the seller, who sells the receivable at a discount to the specialised financial organisation (the factor), to obtain cash;
- the debtor;
- the factor.
Forfeiting is when companies purchase receivables secured by a bank guarantee, a bill of exchange, or a letter of credit.
You can get funds from a so-called "silent partner" (e.g. an anonymous member of a business partnership, or one not involved in management) who in turn obtains the right to participate in the company's profit.
Risk capital (also known as venture capital) involves funding the expansion of private companies by increasing their registered capital. Venture capital is a partnership between the business and the investor.
It involves funding growing private companies by increasing their registered capital.
In the Czech Republic, the CVCA (Czech Private Equity & Venture Capital Association) represents companies operating in the area of risk capital. The main aim of CVCA is to promote venture capital in the Czech Republic.
The most effective way for an investor to obtain venture capital is to select a few investors and to present them with a business plan.
When selecting an investor you should be guided by these key factors:
- The development phase of you business or the type of private capital investment you wish to obtain.
- The branches in which you business operates.
- The size of investment your company needs.
- The geographical market in which your company operates.
Business support organisations can advise businesses on how to find financing.