Erdf Grants in the Czech Republic: Impact on Loans to Small and Medium-sized Enterprises

Membership in the European Union (EU) provides small and medium- sized enterprises (SMEs) in the Czech Republic access to grants for development projects from the European Regional Development Fund (ERDF). But, applicant SMEs receive the ERDF funding only after complete implementation of the awarded project, or a substantial phase of it. Thus, SMEs must initially finance their projects with bank loans, unless they are able to cover their costs with their own resources. The hypothesis to be verified is that bank lending to SMEs when an ERDF grant is involved as collateral will boost the monetary value of loans awarded to the SME sector and outweigh lending to SMEs that do not have ERDF grants. The book identifies the beneficiaries of ERDF grants and the territorial spread of awarded projects in 2004-2005. Additionally, it presents a case study of loans given by the leading lender to SMEs in the Czech Republic. The theoretical framework of this analysis draws on financial risk management and asymmetric information theories. The book is aimed at professionals in the SME sector and banking, though it might be worth reading for anyone else who is seeking information about ERDF grants.