In light of the worldwide economic crisis, the Finance Ministry and the Industry, Trade and Labor Ministry have introduced an action plan for helping small and medium-sized businesses, to cope and overcome the credit crunch. Under the plan, special funds operated in conjunction with Israeli banks will supply finance partly backed by a state guarantee loans. According to a government announcement of January 25, 2009, the funds on offer are as summarized below. Small business support fund This fund is available to small businesses with up to 70 employees and annual sales revenues of up to NIS 22 million. Available credit stands at NIS 440m. Loans of up to NIS 500,000 at market rates of interest may be granted for a term up to 5 years with a 6 month grace period before repayments begin. The state guarantees 70 percent of the loan. Collateral of up to 25% and a personal guarantee of the owners are required. Preferential terms are given to businesses located in Sderot and next to the Gaza Strip, which will require 10% collateral, while the state is committed to provide guarantees of 85%. A one-year grace period applies. Available credit is limited to NIS 62m. For more details, phone the Industry Ministry at 09-7776800. Medium-sized business support fund This fund is available to medium-sized businesses with annual sales revenues of between NIS 22 to 100m. Available credit stands at NIS 1.3 billion. Loans of up to 8% of annual sales revenue are available for a term up to 5 years with a 12 month grace period before repayments begin. Interest will be on regular bank terms for such a loan. The state guarantees 70% of the loan. Collateral of up to 25% and a personal guarantee of the owners is required. According to the government announcement, the fund is administered by Bank Mercantile-Discount, Bank Otsar Hahayal and Bank Hapoalim. For more details, phone 03-5770333 or view details of the fund on the website of BDI who represent the government: www.bdi.co.il Exporters support fund This fund is available to exporters with annual sales revenues of up to $15m. of which at least 5% need to be from exports. Available credit stands at NIS 550m. The loan is granted for any purpose, including working capital, investments, export promotion, etc. Loans of up to 20% of revenues are available but no more than $1m. The loan will be linked the consumer price index or the dollar or Euro and interest will be on market terms. The state guarantees 70% of the loan. Collateral of up to 30% and a personal guarantee of the owners is required. For more details, phone 03-5770333 or view details of the fund on the BDI website www.bdi.co.il. In addition, contractors and service providers who work with the Israeli government may be allowed to reduce the amount of performance bonds according to predetermined milestones achieved, in the coming year. The bond amount for each milestone will be 5% of the financial obligation balance for each milestone. If interested, apply to the accounting general (hashav) or technical section (yechida miksoit) of the relevant ministry. These measures are clearly minor to those offered by the US government to US banks and automobile manufacturers, but they may be useful sources of finance for many Israeli businesses. As always, consult experienced professional advisers in each country at an early stage in specific cases. email@example.com Leon Harris is an international tax specialist.