László Krisán: New Széchenyi loan products to be launched in September 

The Funding for Growth Scheme ‘Go’ (FGS ‘Go’) launched by the National Bank of Hungary (MNB) has exploited its 3,000 billion forint budget. What kind of soft loans can small and medium-sized enterprises in Hungary expect after FGS ‘Go’? 

The Funding for Growth Scheme was an exceptionally successful package with a history of nearly 8 years and it was introduced in several different phases built on each other. The FGS ‘Go’ effectively helped the operation of the loan market and provided funding to the SME sector during the coronavirus crisis.

Now we are already in the phase of reopening, so the first phase of crisis management is behind us. It is quite clear that we need to help the quick recovery of the smallest businesses, just like before. 

We can see that every government in the world uses a combination of five tools: subsidy, capital, loan, tender, and guarantee. The Hungarian government also used a “mix” of these tools. 

One important element of these is cheap subsidized loans. State-subsidized loans provide substantial help while reducing conflicts between banks and businesses. As the state provides a guarantee to the banks, businesses can access funds even with reduced collateral.

How does the product range change? 

After the termination of the FGS ‘Go’, the product range was revised.

We have clearly seen over the past year that loans aimed at stabilizing the liquidity situation were needed most during the crisis. However, during the recovery phase, the focus may gradually shift towards "smart" investment loans.

In fact, we have created a package containing a combination of the best elements of the products used in peacetime and during the crisis, which should be capable of enhancing a dynamic restart of the economy. 

We launched the “5 + 1 + 2” Széchenyi Card GO construction. We started with a total of five products, and we have another product related to a specific area. 

We will launch two new programs in September: the Széchenyi Leasing Construction and the Széchenyi Microcredit, which is aimed at the smallest companies.

Which are the most important elements of the Széchenyi Card GO loan program? 

The ‘free-use’ Széchenyi Card Overdraft GO facility has a 2-year maturity with a fixed interest rate of 0.1% and a maximum amount of 100 million forints. It can be used to finance any expenses related to the day-to-day operation of the business.

The Széchenyi Liquidity Loan GO facility has a maturity of 3 years and a fixed interest rate of 0.2%. It is a ‘free-use’ working capital loan with a maximum amount of 250 million forints, and it is allowed to be used for loan redemption. It can be used to purchase supplies or to finance services related to transportation, loading, warehousing, packaging, equipment maintenance, training, advertising, planning, auditing or even accounting. 

Our third product is the Tourism Card GO, which is an overdraft facility with zero interest, zero cost and zero evaluation fee, with a maximum 3-year maturity and a maximum loan amount of 250 million forints, specifically for the hospitality and tourism sector hit so dramatically by the crisis. 

Our investment loan package consists of two parts. The Széchenyi Investment Loan GO can be taken out from one million forints to one billion, with a 10-year maturity and a fixed interest rate of 0.5%. It can be used to cover practically any investment cost that may arise: real estate, movable property, machinery, tools, equipment, motor vehicles, acquisitions, as well as for generational change, and loan redemption. 

The other investment loan product is connected to agricultural investments, available on the basis of agriculture-related TEÁOR codes, with a maximum loan amount of one billion forints. The ‘Agrár’ Széchenyi Investment Loan GO can be used for the purchase of machinery, equipment, real estate, premises and arable land, as well as for capacity expansion.

What will be the key features of the two new programs starting in September? 

We are launching a new product line. The Széchenyi Leasing Program intends to extend the concept of subsidized interest rates to leasing activities. It helps companies and financial institutions involved in leasing activities. It has a maturity of 10 years and a fixed interest rate of 0.5% until the end of the maturity. 

The other product is related to the efficient use of EU funds in 2021-27. Feedback from businesses reveals that they need help in raising the amount of own contributions, as the crisis made it much harder than before. For this reason, we’ll create the Széchenyi Own Contribution Supplementary Loan. 

So if someone wins an EU tender, they will have the opportunity to take out a 10-year loan with a fixed interest rate of 0.5% to make up for the missing amount of the own contribution.

The EU subsidy received is related to this.

Who can apply for these soft loans and what are the criteria that have to be met? 

Our goal is to help to provide funding for micro and small businesses, especially in rural areas. Companies, sole proprietors or cooperatives can all contact us.

Besides that, medium-sized companies can also apply for our loans, of course.

The average loan value is 25-30 million forints for overdraft loans and 60-70 million for investment loans. 

There is one single condition in order to be entitled to the loans: businesses should be operating from 2019 already, so new companies are not able to apply for these loans. The only exceptions are companies in the tourism and catering sector, for which the requirement is that they should be operating since the end of March 2020 and at least 30 percent of their revenue should come from tourism and hospitality. The Széchenyi Tourism Card GO is available to these businesses, helping all segments put at risk due to the coronavirus.

What is the total budget of the new loans? 

According to the government decision, these loans are not tied to a specific source, as banks use their own resources when giving out the loans. Because of the subsidized interest rates, however, the budget could be limited, but the government is ready to support the implementation of the program by financing domestic SMEs as needed. 

Therefore, as far as the budget is concerned, there is no upper limit.

The Széchenyi Card Restart Loans ensure a fixed soft interest rate until the end of the loan term. The interest to be paid by customers ranges from 0 to 0.5% depending on the type of loan. Can we expect a change in the interest rate of new loan contracts if the interest rate environment in Hungary increases? 

Over the past decade, the monetary policy has ensured a very low interest rate environment, which in itself has laid the foundations for growth through lending. 

In recent months, the MNB has emphasized the importance of achieving the inflation target. As a result, the monetary policy has been modified and adapted to the current market environment. As a first step, the central bank raised the base rate, which is expected to lead to an increase in interest rates. We can already see signs of this in the market. 

However, the Széchenyi Card GO products have been designed in such a way that companies should not have to face a possible increase in interest rates. 

Interest rates remain unchanged during the whole term of the loan and the Széchenyi Card Loans will continue to be available under unchanged conditions this year. 

Which sectors do you think will show the most intense interest? How big do you think the rush will be for the Széchenyi Tourism Card GO?

There may be greater interest from companies involved in trade, manufacturing, agriculture, construction, technical, scientific activities, tourism and hospitality, as well as transportation and warehousing.

However, I do not expect a significant surge in any of the sectors; the turnover will basically be distributed proportionally between them. 

We may see a stronger rebound in tourism in the whole country except for Budapest, as the recovery of rural areas is significantly faster. The demand for the Széchenyi Tourism Card GO will be greatly determined by when the hospitality sector will fully recover.

What types of loans may be in great demand? 

In times of crisis, liquidity is the key. During the pandemic, the most needed loans were those that financed day-to-day operations. At that time, 95% of loans taken out by SMEs were liquidity overdrafts and ‘free-use’ working capital loans.

In the case of the Széchenyi Card GO, there might be a visible change. Besides loans helping day-to-day operations, investment loans may become more significant. We expect a gradual increase in investment loans in the coming period, which will help economic growth already.

Approximately half of the FGS ‘Go’ loans were spent on working capital. How fast do you think the interest in investment loans is likely to pick up? 

It basically depends on how confident businesses are about the future. If companies believe in their own future and development, they will no longer be interested in short-term, 1-2-year loans, but will start considering longer, even 10-year long periods.

In light of this, we expect a moderate growth this year in the Investment Loan GO, the Agrár Széchenyi Investment Loan GO and later in the Leasing Program. 

A considerable shift from working capital loans to investment loans is expected next year.

What are the most important results of the Agrár Széchenyi Card? 

I am very proud of the results of the Agrár Széchenyi Card. It has become one of our most popular loan products remarkably quickly. The number of applications exceeded all our expectations. It offers significant help to primary producers, family farms, young farmers, but even food processing businesses. 

The primary goal of the Agrár Széchenyi Card is to improve liquidity. We also have a sub-product to deal with force majeure, such as frost damage. The force majeure subsidized agriculture card was introduced in 2015, and it provides real help to companies facing difficulties. It has been available with zero interest, zero cost and zero charge.

In 2020, more than 7,000 contracts were signed amounting to a total of 125 billion forints of loans in the scope of the Agrár Széchenyi Card.