Olim can now get larger loans to start businesses

Startup now eligible for loans up to NIS 100,000; Finance Ministry adds NIS 7m. to budget.

olim Nefesh 224.88 (photo credit: Ariel Jerozolimski )
olim Nefesh 224.88
(photo credit: Ariel Jerozolimski )
In light of the popular claim that financial uncertainties prevent many from making aliya, the Immigrant Absorption Ministry has increased the size of loans and amenities available to returning residents and olim attempting to launch new businesses in Israel. Effective as of last week, the ministry is now equipped to provide start-up companies with loans of up to NIS 100,000, after the Finance Ministry allotted an additional NIS 7 million to the annual budget. "They want to encourage people to start businesses in Israel," said Mati Ra'anana CEO Michael Cohen, a business-development and entrepreneurship consultant. "They want to help people find a livelihood. This is one of the best tools for encouraging people to find a way to work and provide for themselves and their families." According to Yael Yurgon, an economic consultant to the Immigrant Absorption Ministry, the driving force behind the development was complaints issued by returning residents that it was simply too difficult to establish independent businesses in Israel. She said with more substantial and accessible loans, the transition into the workforce would be far smoother for immigrants and returning residents. Prior to the change, the maximum credit available to entrepreneurs was NIS 70,000, and it could only be granted to applicants with three guarantors. "It was a big barrier for returning residents and olim," Cohen said. Now, aspiring business owners require only two guarantors. Additionally, those applying for loans need only invest their own money to cover 25 percent of the start-up costs, as opposed to the original 50% down payment. They may also receive certain tax exemptions on income earned outside the country. The indexed interest rate has remained at 2%. The loans last six years, the first of which is considered a grace period to aid in the initial stages of establishing a business. The following five years of payments must be reimbursed. If a new company succeeds for a minimum of three years, its owners are eligible for up to NIS 5,000 of the loan to be transferred into a grant. In 2007, the ministry distributed 350 loans to returning residents and olim. This form of aid comprised NIS 12m. of the NIS 25m. annual budget. In addition to such direct financial assistance, the budget is directed toward subsidizing consultation services and other forms of business guidance for olim and returning residents. Centers have been established throughout the country to offer such services as evaluations of entrepreneurial ideas, aid in planning, courses to improve professionalism and other practical educational endeavors. The population targeted for these loans has proven to be roughly three times more successful in the business world than native Israelis, Cohen said. It is therefore beneficial not only to those receiving loans, but also to Israel's economy to facilitate their efforts to establish businesses in the country and to increase the likelihood of their entrepreneurial success, she said. "It is very hard as a foreign immigrant to find one's course in the employment market," Cohen said. "Not everybody comes from Western, English-speaking countries with connections. Many cannot mobilize themselves in the employment market. This opportunity to start a small business, take care of their livelihood and provide for their family is a very good route to form roots and succeed in Israel."