The majority of dynamically developing enterprises reach at some point such a stage where maintaining the current rate of growth requires obtaining external financing. Not all companies know that they can find support in a venture capital fund that not only invests in selected projects by taking up shares in the company, but can also lend.
In the Podlaskie, Mazowieckie and Warmińsko-Mazurskie Voivodships, the Podlaskie Capital Fund offers such a possibility. What is the cooperation like and what companies can count on such support?
Venture capital funds allocate from several hundred thousand to even several million zlotys for a selected project and offer capital in exchange for a part of shares in an enterprise. Such support may be granted to projects which fulfil certain conditions.
- We carefully select projects and create our investment portfolio. The object of the investment must meet a number of specific criteria, such as the uniqueness of the product or the way in which the service is provided, which represents a significant competitive advantage in the market, and the chance of achieving an above-average rate of return. Additionally, the fund must see the possibility of leaving the investment in the perspective of three to five years, which often means that the originators must be prepared to sell the entire company together," informs Krystyna Kalinowska, Investment Director of the Podlasie Capital Fund. In such a case, can they not count on obtaining financial resources from the fund?
Debt financing - the key to further development
Among the companies that do not qualify for a typical equity investment are many that can nevertheless attract a partner in the form of a venture capital fund. In the Podlaskie, Mazowieckie and Warmińsko-Mazurskie Voivodships, the Podlaskie Capital Fund offers such a possibility.
- Many companies that have entered the accelerated growth path are facing the problem of lack of capital, which is the main barrier in handling growing orders. For such companies, the bank is often not a sufficient source of funding. When assessing creditworthiness, historical financial data are an important element, and therefore the amount of financing proposed is usually too low. It also happens that a company is not creditworthy due to too short a period of operation. In such a situation, the fund may offer debt financing," explains Krystyna Kalinowska from the Podlasie Capital Fund. Such financing may take the form of loans or bonds. However, they are always tailored to the current needs of the company - adds Krystyna Kalinowska.
How does this look in practice?
For a venture capital fund, the future of a company is more important than its financial performance to date. A clear vision of further development and the ability to generate positive financial flows are needed. The cost of such financing is usually higher than in the case of a bank loan, and therefore it is addressed primarily to companies offering high-margin products or services. For such companies, however, it is an attractive solution if they are not able to obtain cheaper bank financing.
- Thanks to the support in the form of debt financing from the fund, companies realize additional profits and increase their market share faster. Without these measures, businesses would have to abandon part of their orders, which would slow down their further development. Such cooperation may often last for many years, and the involvement of the fund may be increased in line with the growing needs of the company - explains Krystyna Kalinowska from the Podlasie Capital Fund.
How do I get this support? The first contact with the fund is to submit a project. Then a date is set for the meeting, during which the fund can learn about the needs of the company. After verification of the financial documents, a timetable is set and a contract is signed.
Companies that need financial support in order to implement their strategy should look for a suitable business partner. Fortunately, there are already entities on the market that are willing to offer such support.
About the Fund
Podlaski Fundusz Kapitałowy is one of the oldest venture capital funds operating in Poland. The Fund was established in 1995 as part of the Polish-British Enterprise Development Program. Since then, he has completed dozens of investments for a total amount of over PLN 40 million, successfully completing many transactions. The Fund may allocate for one project the amount from PLN 400,000 to PLN 1.5 million in the form of taking up shares or granting a loan. The Podlasie Capital Fund supports both young enterprises at the start-up stage and companies in the phase of growth and expansion.