Lender confidence and bank competition boost number of loans

Small and medium-size enterprises (SMEs) have finally found a way to get hold of bank loans. Banks have reported an increasing volume of loans to small and medium-size companies for the first half of 2004. Experts say the shift is because smaller businesses have gained the confidence of lenders and the entire sector has been doing better. Ceska sporitelna, for example, lent 10.4 billion Kc ($400 million) to companies with annual turnover worth 1 billion Kc in the first half of 2004, up by 41 percent compared to last year. In the same period the bank lent another 5 billion Kc to entrepreneurs and small business with turnover below 30 million Kc. Spokeswoman Vera Carna said the bank has also established special commercial centers in each of the country's regions to provide loans. At GE Capital Bank the volume of lending to small firms was up 32 percent to 6.3 billion Kc compared to the same period a year ago. The majority of smaller clients borrow an amount of less than 10 million Kc and in the case of an investment loan pay back the loan in two to five years, said Jan Hainz, the spokesman for GE Capital Bank. Jan Schiesser, an analyst at Atlantik Financial Markets, said two key factors are responsible for the loan boom. He said there is tough national and international competition on the market for bigger clients, leading banks to focus on smaller customers. Also, SMEs have learned to keep their accounting transparent, so it is much easier for banks to assess the loan, Schiesser added. He said he expects the volume of loans will continue to grow sharply in the next two to three years, as the bottom line was very low.