Ukrainian Kickstarter Launched by PrivatBank. What’s the Benefit for Investors and Businessmen?
The article by Myroslav Kiselov, LEXLIGA’s Associate,
has been published on web-resource Prostobiz.Read the article
On 4 April 2016, PrivatBank started up a new service “Credits to Ukrainian Business” (CUB) (). This service has already been named as the Ukrainian crowdfunding platform, though it is not a direct equivalent to popular foreign platforms. Today, the platform features mostly conventional small and medium businesses as registered participants. These include shops, small manufacturers, hairdresser’s parlours, cafés, and restaurants.
CUB makes it possible for SMEs to take loans from the bank’s clients, whereas PrivatBank acts here as an intermediary. Businesses are offered loans on the following conditions:
for legal entities:
- at 2.4 % per month
- loan amount – from UAH 50,000 up to UAH 300,000
- loan period – up to 12 months
- at 2.9% per month
- loan amount – up to UAH 50,000
- loan period – up to 48 months
This platform will be really useful for those businessmen who have experienced problems in getting loans, even at high interest rates, from other banks. Nonetheless, the rate of 27-29 % per annum may appear to be too high for many businesses, and in this case the bank will use all possible tools to have the money repaid. Notably, the CUB website does not contain any information with regard to penalties applicable to businessmen who fail their payments.
If you wish to receive a loan, you need to send your application to PrivatBank’s specialists for consideration and processing, and of course to be the bank’s client with good credit history and work record. It is advisable that the application contains your business plan and the purpose of loan use, but as seen from the already submitted applications on the website, very few of applicants have clearly indicated how they plan to spend the desired loan funds. In addition, the bonus system for potential backers seems to be poorly implemented by businesses. Typically, businessmen offer discounts of 5-10 % for their goods or services, which is obviously not a benefit much sought after by investors. Further, businessmen need to assess their payback possibilities and calculate the total loan amount well before application, because while 2.4 % per month may seem attractive at first sight, over the year the interest eventually reaches as high as 28.8 %.
As regards potential investors, they are offered to choose a project to back up and, basically, become its creditors. The minimum investment threshold makes up UAH 1,000, with the interest rate fixed at 25 % per annum and automatically transferred to your bank account every month. The above rate is higher than the average market offer which serves to attract investors. Also, importantly, a loan may be granted only if the target amount has been raised for the project, similar to the well-known crowdfunding platform Kickstarter. In failure to reach the planned amount, all pledged funds go back to investors to be potentially contributed for another project. Besides that, all loans are covered by insurance for the entire loan period, and in the borrower’s failure to respect the repayment schedule the bank undertakes to refund respective payments to the investor. As we can see, the CUB helps all stakeholders benefit in the process – creditors, businesses, and the bank. Whether this service will grow in popularity with the Ukrainian business community, remains to be seen in the nearest future, and so far the platform has facilitated 46 projects to be posted and UAH 140,000 to be invested within just 2 days of its operation.