Demján Sándor Capital Program funding limit raised to HUF 400 million

During the joint tour of Portfolio and Kavosz in Szekszárd, Dr. Zsolt Beréti, President of the Tolna County Chamber of Commerce and Industry, emphasized in his welcome speech that the most important thing for businesses is to have their financing sorted out, as this is the only way they can enter the market with sufficient confidence. He described the Demján Sándor Capital Programme as a "unique and much-needed measure" that could provide businesses with hundreds of millions of forints on predictable terms, outside of the usual bank credit assessment process.

Dr. Lajos Fajszi, president of the National Association of Entrepreneurs and Employers' (VOSZ) Tolna County Organization, also gave a welcome speech in which he emphasized that the Széchenyi Card has expanded significantly during its 22 years of existence: while it started with HUF 1 million, today the amount that a business can claim is 1.5 billion forints. The recently announced 3% interest rate on all products has significantly increased interest among companies.

According to the president, based on the VOSZ barometer, business sentiment in Tolna County is finally showing an upward trend after a long period of decline. Although investment performance in the county has declined in the last year and the value of developments per capita is low by national standards, he is optimistic about the future. He emphasized that South Transdanubia has become a priority region, with the M6 motorway crossing into Croatia and there is talk of a car factory expected to be built in Pécs. VOSZ has also opened a Széchenyi Card and Business Development Office in Szekszárd.

Last year, 69,000 applications worth 2,600 billion forints were received under the Széchenyi Card Program, of which 57,000 were approved for a total of 2,200 billion forints, said Dr. Róbert Tóth, Deputy CEO of KAVOSZ Zrt., in his presentation, adding that the Széchenyi Card Program is showing a steadily upward trend at both the national and county levels.

Last year, 1,500 applications were received in Tolna County, amounting to HUF 47 billion, and by the end of September this year, 1,200 applications had been submitted, amounting to HUF 41 billion. This year as a whole will exceed last year and the year before last," said the deputy CEO, adding that the announcement of a 3% interest rate will clearly accelerate both the acceptance and contract signing sides.

Highlighting the advantages of the 3% fixed interest rate, Tóth said that this uniformity also makes it easier for businesses, as they do not have to think about how a liquidity or investment-type loan will be priced for different financing purposes. KAVOSZ plans to strengthen cooperation with financial institutions in addition to bank financing. This could be a step forward, especially for the smallest businesses, which often cannot access banks or receive negative decisions.

KAVOSZ is in daily contact with approximately 70-75 financing partners, which involves the movement of large amounts of data, tables, and financial statements. The company processes feedback from 400-600 businesses on a weekly basis, which is used to develop policy recommendations. After the announcement of the 3% interest rate, the number of corporate applications increased 10-20 times, and this trend has remained strong to this day. Dr. Zoltán Bánfi, CEO of the Hungarian Chamber of Commerce and Industry's (MKIK) Capital Fund Management Ltd., emphasized that

the maximum amount of support under the Demján Sándor Capital Programme (DSTP) has increased from HUF 200 million to HUF 400 million.

Based on the decision of the economic cabinet, the change will take effect within one to one and a half weeks.

The programme has also undergone significant expansion in terms of content. In addition to the original goals of green energy, digital development, efficiency, and manufacturing capacity expansion, the following are now eligible for funding:

• Acquisitions and mergers
• Generational change in the form of owner and management buyouts
• Current asset financing
• Non-speculative real estate developments
• Activities of trading companies

In Tolna County, only seven of the 555 potential applicants met the criteria. Nationwide, 115 positive decisions have been made so far, worth HUF 23 billion. The manufacturing, construction, and food industries are the most active in terms of applications. According to the CEO, the program may be exhausted by the end of February due to the increased budget, so he is urging potential applicants to apply.

István Máté-Tóth, Deputy CEO of the Budapest Stock Exchange (BSE), emphasized in his presentation that growth requires capital and cannot be achieved through loans, because banks do not finance risky innovative projects. Capital market financing serves as a supplement to credit. "It is always better to stand on more than one leg," emphasized István Máté-Tóth, who said that the bond market is experiencing extremely strong growth in Hungary, with even relatively small companies now able to issue bonds.

Over the past few years, more than twenty companies have recognized the advantages of being listed on the stock exchange. These companies have raised an average of HUF 1.5 billion in capital on Xtend, the Budapest Stock Exchange's market tailored to medium-sized companies. Among the advantages of being listed on the stock exchange, he mentioned

• financing flexibility,
• value transparency during generational change,
• shares that can be placed in long-term investment accounts (TBSZ),
• the possibility of share-based employee incentives, and
• better performance in partner evaluation mechanisms.

VOSZ president János Eppel presented the organization's renewed strategy and services at the event.

According to the president, the past five years have brought changes to the world that have never been seen before. Disruptions in supply chains, inflation, high interest rates, the energy crisis, and economic stagnation have created conflicts that have fundamentally changed the basis of predictability and reliability. The VOSZ's quarterly business confidence index reached its lowest point in the fourth quarter of 2024, based on a survey of 500 respondents. Although there has been some improvement, businesses remain cautious and are not overly optimistic about the near future.

VOSZ has opened a business development office in every county, providing services in five key areas:

• Financial services: In addition to the basic services offered by the Széchenyi Card, leasing and factoring are also available, and new financial products are being launched on the basis of KAVOSZ.
• Management skills development: Educational materials were developed for senior executives, managers, and entrepreneurs within the framework of a foundation established in cooperation with the chamber.
• Workforce development: A special program is being developed to involve retired and student labor reserves, with discounted training opportunities.
• Digitization: The proprietary VOSZPort enterprise management system provides a single interface for managing all company activities. According to the president, companies that use it consciously and systematically can save around 150,000 forints.
• Energy solutions: From solar panels to creating an energy community. Initial surveys have already begun in four counties, where needs assessment and initial analysis are free of charge.

According to the VOSZ strategy, it is now worth implementing investments that improve efficiency: training, digitization, and energy efficiency. According to the participants of the panel discussion that closed the event, the financing culture of Hungarian small businesses is undergoing a transformation, with capital financing solutions playing an increasingly important role alongside traditional bank loans.

Bánfi emphasized that "entrepreneurs must implement developments and investments that they can generate, rather than those that do not need to be repaid." referring to non-repayable subsidies, and added that negotiations are underway with domestically owned banks to develop combined loan products. It is already accepted in banking logic that capital can act as equity, which is considered a risk-reducing measure in the case of loans.

According to Tóth, the Hungarian financing model is entirely based on banks, which has proven its limitations during recent crises. Financial education and the promotion of financing diversification will be the task of policymakers, the VOSZ, the chamber, and KAVOSZ, Tóth stressed.

According to István Máté-Tóth, 400-800 companies in Hungary would be suitable for listing on the stock exchange. He mentioned that one of the advantages of being listed on the stock exchange is that companies take out loans equal to or greater than the amount of capital raised. A capital increase of one and a half to two billion forints is often accompanied by a loan of two to three billion forints, which means a total of five billion forints in development funds.

Dr. Dóra Halápi, partner at Halápi és Ivicsics Law Firm, highlighted the fundamental differences between the various forms of financing. Credit relationships are distant in nature, require collateral, and involve strict repayment obligations. In contrast, capital investment operates on a partnership basis, where the investor works with the company to develop future plans. The experts agreed that there is no such thing as good or bad financing, only solutions that are suitable for companies. Financial education and promoting the combination of different forms of financing are key to the development of the Hungarian SME sector.

Cover photo and photographs: Portfolio