Support from public resources can be realized either through grants or through financial instruments. The grant is a one-off kind of support, fully consumed by the final beneficiary to cover a part of the project costs. It helps the project promoter to lower the amount of his own money invested into the project. Offering grants make sense in case of projects, which are in public interest and which do not generate profit.
On the other side, financial instruments are a repayable form of support, which means that public resources can be used repeatedly to finance new, economically viable projects. Our fellows from the German and Austrian development banks (KfW and AWS respectively) still manage resources received from the Marshall Plan, initiated by the United States as a recovery instrument after the World War II.
As mentioned above, financial instruments can be used only if projects generate stable cash flow. National promotional banks and institutions often partner with commercial banks and other financiers to complement the offer on the market. This enables to finance projects which the market sees as more risky. This is the case of small municipalities with limited budgets and particularly of big investment projects such as highways, bypasses, university campuses, hospitals and other health/social care facilities, affordable housing or smart city infrastructure.
In some cases, national promotional banks finance even marketable projects. This happens if such projects are crucial for the country´s infrastructure and NPBI´s involvement can speed up its realization. This would be case for various infrastructure projects such as cycling paths, local roads, multi-storey car parks, traffic management systems, homes for the elderly persons, water management infrastructure, community centres, multipurpose arenas or public transport companies’ fleets.
Financial instruments are a targeted way of support, offered to the project promoters when they need it for designed purposes. A way from the application to the financing is usually straightforward and less bureaucratic compared to grants. Involvement of an NPBI can also catalyse the mobilization of private resources. Project promoters can combine a commercial loan with a soft loan from the NPBI, including the junior financing. Such combination lowers the risk for a commercial bank and makes financing more available, often on more favourable conditions (lower interest rate, longer maturity or grace period, lower collateral etc.). This allows to realize much needed infrastructure projects at present, not postponing them into an indefinite future due to budgetary constraints.
In line with its mid-term strategy, the NRB focuses also on sustainable development of Czech regions and municipalities. The NRB offers to the public sector not only financing, but also specialized advisory services. We can assist project promoters with the assessment and preparation of the projects and recommend the most suitable financing model.
