10 - 16 May 2001

Lack of security hindering start-ups from getting loans

by Ivan Brincat

The eMalta commission wants banks and other key business players such as MDC, IPSE and METCO to actively consider promoting and offering venture capital and investment packages.
The chairman of the eMalta commission John Portelli said the aim behind these programmes should be that of allowing companies to invest in e-commerce upgrades.
The eMalta Commission, he said, sees the financial services sector as a strategic partner. It is now seeking the assistance of commercial banks to identify the steps required to upgrade and integrate the banking infrastructure to facilitate the growth of e-commerce in Malta.
Mr Portelli was speaking at a conference on the new economy organised by the Bank of Valletta last week.
The Malta Business Weekly asked BOV chairman Joseph F.X. Zahra whether the bank considered venture capital as a means of providing finance to companies who find it difficult to get loans from banks.
Mr Zahra said IPSE offered a number of facilities for start-up companies and small businesses. “Loans are given to businesses who have a clear business plan. Obviously one must take a calculated risk.”
BOV’s chairman said IPSE also had a Business Incubation Centre at Corradino and its aim is to help small businesses apart from giving them services they require.
However, start-up companies are currently finding it hard to get loans from banks or from any other institution because they are always being asked what security they can offer.
GRTU director general Vince Farrugia said he did not know of any company which has received any funds from IPSE.
In the GRTU report on creating a better business environment in Malta, the association suggests that small business should enjoy the benefits of the new knowledge-based economy.
It urges the government to offer incentives to enable small businesses to invest more in information technology and electronic commerce in general and proposes the introduction of a 100 per cent capital allowance which should be introduced for investment in information technologies.
Around 79 per cent of businesses have invested in personal computers. However, the rate at which hardware and software becomes obsolete is very high.
The GRTU said the equipment can deliver significant benefits but the costs involved are a real deterrent to further investment. It was thus asking the government to consider writing off the cost of investing in information technology in the year of purchase. This could be achieved either by way of the profit and loss account or a claim of capital allowances.