Rules, Regulations and Transaction Costs in Transition Bulgaria

For the same reasons, only 34.2% of the entrepreneurs interviewed have used loans in carrying on their business.
The actual percentage is highest in the production sector - 50%, followed by trade - 30%, and services - 22.2%.
Small enterprises resort to loans twice more often than micro-firms.
Table 16 makes it clear that the structure of the loans has remained unchanged since 1996:
Table 16
(More than one answer allowed)
Valid percentage Total
Total Production Trade Services
YES
1996
2000
2000
2000
2000
State-owned bank 36.6 46.3 62.5 38.1 25.0
Private bank 17.1 24.4 18.8 19.0 75.0
Friends and family 41.5 41.5 43.8 38.1 50.0
Inter-firm lending
(deferred payments
to partner firms)
4.9 19.5 18.8 19.0 25.0
Now, like in 1996, the loans used are primarily one-year, with a maximum term of 5 years and a minimum term
of 6 months. The interest rate amounts to 15.5% on average, with 110% indicated as a maximum and 0% shown
as a minimum. The huge dispersion in the answers is also due to the diverse structure of the loans and to the fact
that they were obtained in different years.
Nearly 66% of the firms interviewed had to provide guarantees for the loan. 71.4% used as guaranty real estate,
25% movable property, and 22.2% used bank guarantees.
The interviewees managed to obtain loans in two ways: either on their own, or through an intermediary. In 33, out
of 40, firms, which used loans, a representative of the firm dealt with the lending procedure and that cost 10 days
on average. 7 firms used the services of an intermediary which shortened the period of obtaining the loan by 3
days (See Table 17).
Table 17: Responses to the question How much time did you spend to obtain a loan?
Without
intermediary
Total Production Trade Services Sofia Large
district
centre
Smaller
town
Arithmetical mean 38.73 27.4 46.3 26.0 77.6 30.75 32.2
Median 10 10 12.5 30 7 22.5 12.5
Valid cases 33 10 20 3 5 8 20
30