Debt financing is the most common method for an enterprise to finance its development if it is lacking its own capital. The following text briefly summarises the most common forms of debt financing suitable for small and medium-sized enterprises. These are:

  • bank loans
  • micro-financing
  • leasing
  • factoring

For Czech entrepreneurs, a less prevalent alternative is to ensure financing through venture capital or business angel investments. However, this does not concern debt financing, but rather the investor’s entry into the firm’s basic capital.

Bank loans

In the Czech Republic, small and medium-sized enterprises most often turn to banks for necessary sources of financing. Bank financing has long predominated on the Czech market and tens of credit products from various banking institutions exist here, from current-account overdrafts to special-purpose loans. The names of credit products change and various banks offer variants that differ on the surface, though they are essentially similar.

Entrepreneurs can borrow for investments in growth and development, to purchase machinery, etc. Most banks require collateral, which can be real estate, personal property or bills of exchange. The price of provided credit is the interest rate, which depends directly on the level of risk to which the bank is exposed.

Banks also provide operating capital, which is not money in the form of a lump sum, but rather financial resources that supplement the everyday needs of the firm. Operating capital is used for covering short-term differences between income and expenses, and for bridging temporary cash-flow gaps. Current-account overdraft can be used in such cases.

Bank credit is suitable primarily for existing and prospering enterprises that already have a history of several years in business behind them. Most banks do not provide financing to start-up enterprises. For such enterprises, it is more appropriate to seek out specific, supported micro-financing products.

The first steps of entrepreneurs who are planning to use bank credit should be to visit the websites of banking institutions, where it is possible to compare individual conditions.


If you have a small or start-up enterprise, or your enterprise has a short business history, you can take advantage of favourable small loans from specialised institutions.

The main source of micro-financing is the Czech-Moravian Guarantee and Development Bank, a.s. (ČMZRB). Entrepreneurs can receive from ČMZRB loans under favourable conditions – with a low fixed interest rate (possibly interest-free), with a long repayment term and favourable regime with regard to ensuring credit. Another product offered by ČMZRB is a bank guarantee which makes it possible for entrepreneurs to obtain credit from commercial banks.

Advantageous conditions of financing can be obtained thanks to support provided from the state budget and, since 2004, from European Union structural funds. Within the framework of support from structural funds, ČMZRB is implementing the programmes called GUARANTEE, PROGRESS, START and MARKET.

More detailed information on contacts to this bank and on it programmes is available at Micro-loans for co-financing innovation projects are also provided by the South Moravian Innovation Centre (

In a limited number of cases, micro-financing can be obtained from some commercial banks. This primarily concerns special credit programmes provided in cooperation with international institutions such as the European Bank for Reconstruction and Development.


This form of financing has existed on the Czech market for a longer period. There is thus a good possibility to select an appropriate leasing company, as financial conditions such as interest rates and leasing terms are almost indistinguishable from each other.

Financial leasing is essentially a long-term lease with subsequent purchase. During the period of leasing (payment), the subject of leasing is owned by the leasing company and upon full payment of the lease, the entrepreneur becomes the owner of the subject of leasing (a car, for example).

More information about leasing and about companies that offer it can be found on the website of the Czech Leasing and Finance Association (


Most small and medium-sized enterprises have the largest part of their working capital in reserves and receivables. Factoring is a financial instrument that helps to solve everyday problems that arise when the value of a receivable, de facto monetary resources pertaining to the enterprise, appear on the client’s account after the maturity date of an invoice but the entrepreneur needs these resources immediately. The principle of factoring consists in the fact that a factor (a bank, but also often a specialised financial institution) purchases receivables owed to an enterprise by its clients, and immediately provides funds to the enterprise. Factoring is suitable for most small and medium-sized enterprises that have already been operating for a few months and have a stable and growing clientele. It is not appropriate for new firms that do not have a history of payment relationships with their clients. You may also encounter a similar product called forfaiting – financing of long-term receivables in larger volumes. A listing of factoring companies operating in the Czech Republic is available on the website of the Czech Leasing and Finance Association (

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