Bridging the Financing Gap for Small Businesses in Romania

Small businesses play a significant role in Romania’s employment landscape, accounting for every two out of three persons employed in the country. Yet, these businesses face constraints in access to funding. The SME Finance Gap in Romania is estimated at US$32.7 billion.[1]  While SMEs account for half of the country’s GDP, Romania still has the lowest ratio of SMEs per 1,000 inhabitants in all of the European Union. There is much potential for this segment to grow, but capital must be available to fund it.

RoCredit is a Romanian Microfinance Institution that was originally founded in 2007 as a regulated Non-Bank Financial  Institution. The company fills an important gap in the Romanian financial services system by providing financing to SMEs and micro entrepreneurs that are unable to access credit from traditional banks. RoCredit provides a wide range of financial products to its borrowers, such as working capital credit lines, loans secured by promissory notes, investment loans, and factoring services, among others.

The company’s core invoice discount product, called the  “scont” loan, fills a much needed liquidity gap for individuals and businesses. How it works is that each time a small business borrower fulfills an order for its customer, it generally will not receive payment until between 60 and 120 days following delivery. Without liquidity during this period, businesses may be required to forgo additional work and delay salary payments to employees, thus missing out on further revenue generating opportunities. Through a comprehensive legal, financial and fraud risk assessment of both the borrower and the payer, RoCredit is able to turn around funds to its customers within approximately 3 days of the invoice date (or as little as 24 hours in the case of a new disbursement to an existing borrower), which allows small businesses to continue to pay salaries, purchase raw materials and maintain uninterrupted operations. RoCredit is more suited to meet MSMEs’ invoice financing needs than banks, which cater mostly to larger suppliers of corporations. 

The information contained here has been written for MicroVest Capital Management LLC ("MicroVest") and no representation or warranty, expressed or implied is made by MicroVest as to the accuracy or completeness of the information contained herein. The portfolio company figures presented in this document have been provided by the respective companies to MicroVest and are not independently verified. Specific financial institutions are discussed for educational purposes only, do not represent all of the portfolio holdings and it should not be assumed that investments in the financial institution identified and discussed were or will be profitable. The financial institutions profiled were selected based on their financial inclusion and impact only, with no reference to amount of profits or losses, realized or unrealized. This piece is for informational purposes only and is neither an offer to sell nor a solicitation of an offer to purchase an interest in any MicroVest product (the "Funds"), and nothing herein should be construed as such. Any such offer or solicitation will be made only by means of delivery of a definitive private offering memorandum which contains a description of the significant risks involved in such an investment. Prospective investors should request a copy of the relevant Memorandum and review all offering materials carefully prior to making an investment. Any investment in a MicroVest product is speculative, involves a high degree of risk and is illiquid. An investor could lose all, a significant portion or some amount of its investment. You should not construe the contents of the enclosed materials as legal, tax, investment or other advice. To invest with MicroVest, one must be a qualified purchaser and an accredited investor. The investments may be deemed to be highly speculative investments and are not intended as a complete investment program. They are designed only for sophisticated persons who can bear the economic risk of the loss of their entire investment in the Funds and who have a limited need for liquidity in their investment. There can be no assurance that the Funds will achieve their investment objectives.