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Sources of Financing

Sources of Financing
For U.S. Companies Exporting and Investing in Bulgaria

I. Financing Available from the Bulgarian Banking System

The Bulgarian National Bank (BNB) operates independently of the government and reports directly to the Parliament. BNB regulates the banking system but under the Currency Board Arrangement, has no discretion in setting monetary or exchange rate policy (the Bulgarian Lev is pegged to the Euro with 1.955 BGL exchanged for 1).

There are 32 commercial banks in Bulgaria; twenty-eight are fully licensed and authorized to engage in international transactions and six are branches of foreign banks in Bulgaria. The commercial banks have total assets of new Bulgarian leva (BGN) 17.323 billion (about USD 10.83 billion or approximately 50% of 2003 GDP). Approximately 43 percent of bank assets are concentrated in three banks: Bulbank, State Saving Bank (DSK), and United Bulgarian Bank (UBB). Foreigners hold approximately 85 % of the total banking capital as of March 31, 2004.

The Bulgarian banking system has undergone considerable transformation since its virtual collapse in 1996. The privatization of the banking sector was handled by the Bank Consolidation Company and was completed in 2003. It is considered to be the most successful privatization in Bulgaria.

Bulgaria's banking system is highly capitalized. The average capital adequacy ratio (capital base to risk-weighted credit exposures) for the banking system declined from 43 % at end-1998 to 23 % in September 2003, but still remains high relative to the Bulgarian National Bank's requirement. BNB's Regulation No. 8 requires commercial banks to keep the capital adequacy ratio at 12 percent. This ratio suggests that while liquidity is improving, banks still could expand their lending. Nevertheless, commercial financing becomes more available for private companies and consumers in Bulgaria.

Some Bulgarian banks may have 100 or more U.S. correspondent banks, and some U.S. banks may have correspondent relations with more than one Bulgarian bank. As banking relationships can change quickly, the best source of current information on correspondent banking arrangements is the banks themselves.

Please refer to section five for current information about the banks in Bulgaria.

II. Financing Exports in Bulgaria

There are a number of methods used to settle payment in Bulgaria: cash in advance, letter of credit used in conjunction with a documentary draft (time or sight), promissory note, documentary collection or draft, open account and consignment sales. As with U.S. domestic transactions, a major factor determining the method of payment is the degree of trust in the buyer's ability and willingness to pay.

Because of the protection it offers to the American exporter and the Bulgarian importer, an irrevocable letter of credit (L/C) payable at sight is commonly used for settlement of international payments.

Another payment option is the use of documentary collection or open account with international credit insurance that, unlike the letter of credit, allows the importer's line of credit to remain open. At the same time, this option protects the exporter if the buyer goes bankrupt or cannot pay.

Trade finance options for Bulgarian importers are still limited. In most instances, Bulgarian companies assume the full financial burden in purchasing goods. In trying to make sales in Bulgaria, U.S. companies may have to develop creative payment schemes, which may increase the risk of the transactions. To offset that risk, it is necessary to develop a strong client relationship.

International financial remittances in payment of imports into Bulgaria are generally allowed. The export of hard currency by commercial entities (including juridical persons and sole traders) is permitted only by bank transfer. Transfers for current international payments (imports of goods and services, transportation, interest and principal payments, insurance, training, medical treatment and other purposes defined in Bulgarian regulations) must be supported by documentation such as invoices, certificates, or transport documents, to the transferring bank.

Contact information for banks in Bulgaria may be found on the Bulgarian National Bank and Association of Commercial Banks websites:


III. Financing Available from International Financial Institutions

a. European Bank for Reconstruction and Development (EBRD)

The European Bank for Reconstruction and Development is the largest single investor in Eastern Europe and the Former Soviet Union and mobilizes significant foreign direct investment beyond its own financing. The largest shareholder of the European Bank for Reconstruction and Development is the U.S. Government. EBRD’s programs are open to U.S. investors. The European Bank for Reconstruction and Development provides loan and equity finance.

More information about EBRD is available at:

b. World Bank (WB)

The World Bank delivers their programs through a combination of financial assistance and advisory services. Since the World Bank started their work in Bulgaria in the early 90s, the Bank’s total financial support has been in the order of $1.82 billion. For the three-year period ending next year the financial support adds up to $750 million, of which 60% in quick disbursing assistance in support of policy reform.

The World Bank assistance has aimed at fostering sustainable economic growth in the country, while addressing poverty through improvements to the social safety net and other programs. The World Bank is currently financing 8 projects in Bulgaria with commitments of about $250 million including the Health Sector Reform Project ($ 63.3 million), the Social Investment and Employment Promotion Project ($ 50 million), the Registration and Cadastre Project ($ 37 million), etc. Additionally, it is providing grants of more than $5 million.

Sections of the World Bank with active roles in Bulgaria:
1. While the International Bank for Reconstruction and Development (IBRD) does not give loans for private-sector investments, its procurement procedures enable U.S. exporters to bid on public procurement contracts. To date, approved projects are in the energy, telecommunications, residential heating, railways, health, environmental, and public administration sectors.
2. The International Finance Corporation (IFC) promotes growth by financing private sector investments. IFC provides both equity and debt financing, without sovereign guarantees.
3. The Multilateral Investment Guarantee Agency (MIGA) encourages foreign investments by providing private investors with investment guarantees (political risk insurance) against the risk of currency transfer, expropriation, war, civil disturbance and breach of contract by the host government.

The World Bank’s future focus in Bulgaria will be on supporting continued reform for improved competitiveness. Investment support will be focused on areas for EU accession, including building capacity for absorption of EU funds – infrastructure, rural development, social sectors.

More information about WB’s role in Bulgaria could be found at:
World Bank

c. Small Enterprise Assistance Funds (SEAF)

SEAF Bulgaria has been active on the Bulgarian financial markets since 1994. The organization is managed by Small Enterprise Assistance Funds (SEAF) which has two venture capital funds in Bulgaria – Trans-Balkan Bulgaria Fund (TBBF) and CARESBAC Bulgaria (not active). The funds have participation from the U.S. Agency for International Development, IFC, and EBRD.

The Trans-Balkan Fund (TBF) was established in December 2000, and has operations in Bulgaria, Croatia and Romania. TBF has USD 7 million investment capital exclusively for Bulgaria. It provides long-term financing (equity and quasi-equity capital) as well as business support to growth-oriented, private Small and Medium Enterprises in Bulgaria.

More information about SEAF is available at:

d. International Finance Corporation (IFC)

The European Bank for Reconstruction and Development (EBRD), together with the International Finance Corporation (IFC), have started the Euromerchant Balkan Fund (an investment fund capitalized at $ 27 mln) that invests in small- and medium-sized businesses. The EBF is managed by Global Finance (a Greek venture capital firm) and is permitted to invest from $ 500 000 to $ 4 mln for up to 10 years in any single project while assuming a minority position.

e. European Investment Bank (EIB)

The European Investment Bank (EIB) is the most important source of EU project financing for U.S. companies, as they can participate in most tenders involving EIB loans of its own resources. Trans-European Network (TEN) energy, telecommunications and transport sectors are priorities for the EIB.

More information about EIB is available at:

f. European Union Programs

American companies may qualify for PHARE- and ISPA-funded contracts if they have European subsidiaries that qualify as European companies pursuant to EU definitions.

1. The PHARE Program delivers financial and technical assistance in key sectors of the Bulgarian government’s efforts to restructure the economy toward a market-oriented system. The program contributes to creating the administrative, regulatory, financial, and commercial framework.

2. The ISPA funds are grants to help bring the infrastructure up to European levels as part of the European Union accession process.

For more information refer to:

IV. Financing Available from U.S. Institutions

a. The Bulgarian-American Enterprise Fund (BAEF)

The Bulgarian-American Enterprise Fund (BAEF) is a $57 million bilateral assistance fund funded by the U.S. Congress to promote the development of the Bulgarian private sector and to promote joint ventures between small and medium-sized Bulgarian firms and Western companies.

The Fund provides debt and equity financing ranging from $100,000 to $5 million. With more than 60 projects, its SME Investments program has provided the vehicle for significant growth and diversification. Investments are made in a wide variety of sectors including agribusiness and food processing, manufacturing, distribution, Internet and healthcare. BAEF has an office in Sofia.

The Bulgarian-American Credit Bank, fully owned by BAEF, extends investment credits for private companies. BACB also provides mortgage loans to individuals for the purchase of homes and consumer credit. Standard lending terms include a repayment period between 3 and 10 years, minimum loan amount of $5,000 оr EURO 5,000, and a loan-to-value of underlying property ratio of up to 75% for residential loans and up to 65% for commercial loans. BACB has offices in Sofia, Plovdiv, Varna and Bourgas.

More information about BAEF is available at:

b. Citibank, N.A.- Sofia

Citibank Sofia is a full-service corporate and investment banking branch, a member of Citigroup. Citibank Sofia provides financial services and products to multinational companies, local companies, and the public sector. The product offering include: debt products, structured corporate finance, project finance, government securities services, cash, trade and treasury services, asset management, advisory services on mergers and acquisitions.

More information about Citibank, N.A.- Sofia is available at:

c. Small Business Administration (SBA)

The Small Business Administration (SBA) provides financial and business development assistance to encourage and help small U.S. companies in developing export markets. Export loans are available under SBA's guarantee program.

1. The Export Working Capital Program (EWCP) provides Short-term working capital: up to one year. The EWCP program encourages lenders to offer export working capital loans by guaranteeing repayment of up to $1 million or 90 percent of a loan amount, whichever is less.

2. The International Trade Loan Program (ITL) provides medium to long term working capital- up to 25 years. SBA can guarantee up to $1.25 million, to the borrower.

3. SBA Export Express are export loans for up to $150,000.

For more information about SBA programs refer to:

d. The U.S. Trade and Development Agency (USTDA)

The U.S. Trade and Development Agency (USTDA) is an independent U.S. Government agency that promotes U.S. exports for major development projects. USTDA funds feasibility studies, consulting contracts, training programs, and other project planning services related to U.S. exports, as well as grants for pilot procurements of U.S. machinery or equipment. Contracts funded by USTDA grants must be awarded to U.S. companies. U.S. involvement in project planning helps position potential U.S. suppliers at the project implementation stage.

So far the U.S. Trade and Development Agency has approved funding of nearly $145 million for the agency's project planning and development activities in Central and Eastern Europe. USTDA has been very active in Bulgaria providing feasibility studies for $16.5 million in the energy, environment, transport, air traffic control, and telecommunications sectors.

For more information about USTDA’s funded projects refer to:

e. Overseas Private Investment Corporation (OPIC)

The Overseas Private Investment Corporation (OPIC) is a self-sustaining U.S. Government agency that promotes growth in developing countries and transition economies by encouraging U.S. private investment. OPIC's key programs are its loan guarantees, direct loans, and political risk insurance. OPIC's main involvement in Bulgaria is the Southeast Europe Equity Fund (SEEF), a $150 million equity fund established together with George Soros, for investment in the region.

OPIC also offers an Eastern European Growth Fund, designed to match OPIC funds with private venture capital to finance new business; the Small Business Loan Guarantee Program; the Bancroft Fund, and an environmental investment fund. So far OPIC has agreed to provide political risk insurance for the $200 million project for the modernization and rehabilitation of Maritsa East III thermal power plant with the participation of Entergy and the Bulgarian National Electric Company.

OPIC has recently undertaken several initiatives to increase its support for U.S. small businesses in their efforts to invest in emerging markets overseas. The new Small and Medium Enterprise Department and OPIC’s Small Business Center (SBC) were established specifically to address the needs of small and medium-sized American companies in order to ease their entry into new markets.

The Small and Medium Enterprise Department will be responsible for OPIC’s Direct Loan program, which provides financing to U.S. businesses with annual revenues under $250 million. Other finance activities will be housed in a new Structured Finance Department, which will be responsible for the current Investment Guarantee program as well as special initiatives.

Building on OPIC’s outreach efforts to the small business community, the Small Business Center (SBC) offers qualified small businesses the opportunity to utilize OPIC’s resources with improved customer service, flexible coverage and easier access through a streamlined approval process. The SBC will help meet these needs by providing financing and political risk insurance to eligible small businesses.

Any U.S. small business with annual revenues less than $35 million is eligible for SBC programs. For businesses with annual revenues over $35 million and under $250 million, OPIC’s regular small business programs are available.

In an effort to better meet the growing needs of U.S. small business as they expand into overseas markets, OPIC will offer political risk insurance at a reduced rate as part of its small business loan program. OPIC will offer or ‘wrap’ insurance on equity investments to eligible U.S. equity sponsors or U.S. corporate borrowers receiving SBC loans of up to $10 million from OPIC. The SBC loan borrower may elect this insurance coverage for up to $6 million of their equity investments. Pricing will be based on a one-time fee for the life of the OPIC loan up to 15 years.

More information about OPIC’s programs could be found at:

f. U.S. Export-Import Bank (Eximbank)

The U.S. Export-Import Bank (Eximbank) is an independent U.S. government agency that helps finance U.S. exports by providing loans, guarantees, and insurance. Eximbank financing already is supporting U.S. exports to Bulgaria’s power, construction, and telecommunication sectors.

For exports to Bulgarian state-owned entities, EXIM will guarantee a commercial bank loan up to 85 percent of the value of the contract, provided that the entity provides a sovereign government guarantee or the equivalent. EXIM will also accept a guarantee from Sofia Municipality. It is open for projects of short or medium term (project value over $10 million with a maximum repayment term of 5-7 years). For private transactions, Eximbank typically requires a guarantee by a Bulgarian bank. Eximbank does not yet provide credit guarantees or insurance for routine contracts with private companies in Bulgaria.

More information on Eximbank and its financing conditions can be found on its website:

ExIm Bank

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