Is bond financing the right choice for your Company?
HowissuingandlistingaBondontheCSEcouldbenefityourSME
BOND FINANCING
A solution for SMEs?
Small and medium-sized enterprises (SMEs) face a variety of financial challenges that can impact their growth and sustainability, such as:
limited access to funds, cash flow management issues, difficulty in managing debt, difficulty in attracting investment and lack of financial expertise.
Overall, these financial challenges can make it difficult for SMEs to grow and succeed in the long run, highlighting the importance of developing strong financial management skills and seeking out appropriate financing options.
Bond Financing can provide an alternative solution for these issues.
BOND FINANCING
How can bond financing benefit your SME?
Issuing a corporate bond can provide many benefits to your company including accessing funds that can be used for expansion, investment, or other business purposes.
By issuing bonds, a company can raise large amounts of funds at a relatively low cost, compared to other forms of financing such as bank loans. Additionally, bondholders do not have an ownership stake in the company, so issuing bonds does not dilute the ownership of existing shareholders. Finally, a successful bond issue can also help to establish the company's creditworthiness and strengthen its reputation in the financial market, which can lead to further opportunities
These benefits can be amplified and expanded with a successful listing of the Bond on the Cyprus Stock Exchange.
BENEFITS OF LISTING ON CSE
Listing your corporate Bonds on the CSE brings further benefits to your company:
Vehicle to raise funds
Finance development and growth and improve competitiveness of your company.
Increased Marketability
Easier to attract and facilitate investors from abroad.
Enhanced Corporate Image
More transparency enables listed companies to obtain financing on better terms than non-listed entities.
Better Corporate Governance
Enhanced visibility and credibility due to complying with various regulatory norms. Easy and quick listing procedure, with relatively low listing and annual fees compared to other European Stock Exchanges.
Keep Control
No need to go public as a private company can list its corporate Bond on the CSE.
BENEFITS TO YOUR INVESTORS
Listing your corporate Bonds on the CSE also benefits your investors:
Greater Marketability and liquidity
Easier to liquidate investments in listed securities vs. private investments.
Tax Benefits for Investors
In Cyprus, profits from the sale of securities are exempt from income tax.
Income from interest received is exempted from income tax for Cyprus Tax Residents. However, interest received by a person in the ordinary course of business, is not exempt but used in calculation of income tax (natural person) or corporate tax (legal person).
Cyprus Tax Residents are subject to a Special Defence Contribution (SDC) of 3% on interest received from Corporate Bonds of listed companies. If the Company’s bond is not listed on the CSE, the SDC is at 30% of interest received. However, interest received by a person in the ordinary course of business is not considered interest but income and is not subject to SDC.
Non-Cyprus Tax Residents are exempted from SDC.
TESTIMONIALS - ELLINAS FINANCE
In 2018, Ellinas Finance Public Company Ltd (ELF’) was in need of cashflow to help fund the launch of its new factoring service, as well as its other financial services.
In 2019, ELF was able to successfully raise and issue €1.5 mil secured 5year Bonds with 3,5% annual interest through a private placement which was addressed to a limited number of persons (150 person per Member State). Following, and with the assistance of our Corporate Finance Team, the ELF Bond was listed on the Regulated Bond Market of the CSE in September 2020.
We were able to sit down with Mr Nearchos Petrides, the CEO of ELF, and gain some insights from the Company's perspective.
HOW HAS BOND FINANCING HELPED ELF OVER THE PAST YEARS?
ELLINAS FINANCE PLC
"Bond financing has helped ELF to increase its capital available for new business. The Bond attracted funds from investors which where then used by ELF to new financing contracts with our clients".
WHAT IS THE BIGGEST ADVANTAGE YOU’VE SEEN FROM BOND FINANCING VS OTHER LOAN FINANCING?
ELLINAS FINANCE PLC
"It is a very different source of funding. The Bond targets informed investors and one of the advantages is that the Company has developed its awareness to high net worth individuals through the issue. It gave the opportunity to promote ELF to these investors which in the end can be a real opportunity to create new business and attract new clients for our financial services. Also, another advantage is that Bond financing does not usually require a security compared to a traditional bank loan, in contrast to a bank which would request hard collaterals from us. Bondholders are willing to take some risk, and of course, require a higher return from us."
WHAT HAS BEEN THE BIGGEST ADVANTAGE OF LISTING YOUR BOND ON THE CSE?
ELLINAS FINANCE PLC
"The fact that it gives the opportunity to our investors to negotiate their bond/investment in the market. It enables them to have a way to receive their investment or part of their investment earlier from the maturity day if the need it."
HOW DOES PRUDENS CF HELP?
Our Corporate Finance Team, in cooperation with our client, structure the financial instrument and solution that best suits their needs. We then guide our client through the listing process, draft Admission Documents and/ or Prospectuses, as applicable, and coordinate the whole process of the Listing from start to finish, liaising with the regulatory authorities, coordinating the submission of required documentation, and advising all the parties involved.
Further to services provided prior to the listing, our Corporate Finance team continues to provide services to Companies with securities listed on the CSE, such services might be in the form of corporate advice, compliance advice, Nominated Advisory services, valuations, execution of corporate actions and/ or listings of additional or new securities.
For more information on the full Corporate and Fiduciary services provided by Prudens Limited, visit out website at prudensgroup.com or call us at (+357) 22020500.