Revista Economică 70:2 (2018) [628186]

Revista Economică 70:2 (2018)

16 THE PROFILE OF THE ROMANIAN ENTREPRENEUR FACING
THE CHALLENGE OF START -UPS FINANCING

Bianca Cristina CIOCANEA1, Ioan Cosmin PIȚU2, Alexandru Mirel
IFRIM3

1,2NAFA, 7h Regional Directorate for Fiscal Fraud Prevention , Sibiu,
Romania
3Inspectorate for Emergency Situations "Dealul Spirii" Bucharest -Ilfov,
Bucharest, Romania

Abstract
A distinct feature of developed economies is represented by the important role that
entrepreneurship has, considered to be a central pillar of economic growth. The
motivated entrepreneurs, prepared for change and risks, are setting up new job –
creating firm s. Technological progress is generating new businesses and also helps the
development of existing ones, being an active instrument in adapting to changes of the
market, acquiring new knowledge and generating productivity. Bearing in mind the
restrictions t hat small businesses face when it comes to resources and their vulnerability
to environmental change, a deep understanding of the factors and mechanisms that
explain the development of small businesses is a key issue for business owners and the
economy. Th at is why there has been an increasing interest in identifying the main
sources of start -up financing in Romania.

Keywords: Entrepreneurship, business financing, start -up

JEL classification: L26, M13

1. Introduction
Along with technological change and the intensification of global
competition brought about by globalization and economic liberalization, the

1 NAFA, 7h Regional Directorate for Fiscal Fraud Prevention, Sibiu, [anonimizat]
2 NAFA, 7h Regional Directorate for Fiscal Fraud Prevention, Sibiu, [anonimizat]
3 Inspectorate for Emergency Situations "Dealul Spirii" , Bucharest -Ilfov, [anonimizat]

Revista Economică 70:2 (2018)

17 assumption to encourage entrepreneurship for creating a country's
competitiveness today, seems more valid than ever.
Entrepreneurship is more than a mechanical economic factor (Pirich,
2001). Entrepreneurship stimulates productivity growth and and also economic
competitiveness, combining two vital factors, in a world economy that is more
and more globalizes: the power of changing and innovation process.
Today, entrepreneurship is no longer an abstract concept, because there is
growing demand and interest in placing "entrepreneurship" (the creation of new
businesses) as a key element in the process of developing and revitalizing less
developed areas in Europe. Moreover, the increase in awareness of the
importance of newly created enterprises and small and medium -sized
enterprises (SMEs) in economic development over the last decade has led many
public administrations, made up of members of all political parties and at all
levels, to create policies that favor and stimulate the creation of new businesses.
The SME sector becomes today the most active sector of the economy and,
at the same time, a formidable innovative system . The vital contribution made
by SMEs to economic growth is a unanimous reality. Addressing their
beneficial economic and social effects has led to the SME sector being
considered as an area of strategic interest to the economy. (Avasilicai, 2009)
2. About Entrepreneurs and Entrepreneurship in Romania
Among the economists who have made a significant contribution to the
theories of entrepreneurship, Schumpeter, does not consider the entrepreneur to
be the director of intercourse. It focuses on innovation and the combination of
resources, considering that the entrepreneur must be strong enough to swim
against the current society. What distinguishes Schumpeter from his ancestors
is the notion that it is not necessary for the entrepreneur to possess wealth, with
the emphasis on innovation. The author, taking into account the organization's
ability to support itself, makes a difference between the entrepreneur and
management and between entrepreneurship and management functions. (Marza,
B., Serbu, R., Stoica, E., Todericiu, R., 2012)
As far as the entrepreneur is concerned, some definitions are given below:
– The entrepreneur is the person who identifies the opportunity of a
business, assumes responsibility for initiating it and obtains the
resources needed to start the business.
– The entrepreneur is the person who takes the risks of running a
business.

Revista Economică 70:2 (2018)

18 – The entrepreneur is the one who manages the resources needed to
operate a business based on innovation.
– The entrepreneur is an authorized natural person or a legal person who,
individually or in association with other authorized natural persons or
with legal persons, organizes a commercial company for carrying out
deeds and trade acts for the purpose of obtaining profit through the
realization of material goods, respect ively services, from their sale on
the market under competitive conditions. (Law 133/1999)
Thus, the entrepreneur is a person who initiates and carries out a set of
activities, characterized by risk and innovation, in order to obtain material and
personal satisfaction. (Cordos, Bacali, L. and others, 2008)
Due to the fact that, along with the other countries in the region, Romania
joined the transition to a market economy, as well as on the path to integration
into the European Union, legislative norms were developed to adapt the
Romanian legislation to the European requirements.
Regarding the SME sector, the main law currently governing measures to
increase the favorable framework for the establishment and development of
these enterprises is Law no. 346 of July 14, 2004. According to the company,
the enterprise is any form of organizing an economic, autonomous patrimonial
and licensed activity, according to the legislation in force, to do business acts
and deeds in order to obtain profit under competitive conditions. Businesses
may be: commercial societies, cooperative societies, independent individuals
and family associations, all authorized under the laws in force. (Nicolescu O.,
2001)
3. Business Financing – risks and challenges for start -ups success
For smal l companies or at the beginning of a road that can not convince a
financial institution to grant them, there is also the option to operate on
shareholders' money (theoretically free financing) or "supplier credit" (delays
in paying bills – in 10 years , the average bill payment period doubled from an
average of approximately 60 days to 120 days).
The main funding options available for Romanian companies include: own
funds (reinvestment of profit and capital increase), borrowed funds (from
shareholders and financial institutions) and non-reimbursable funds. Depending
on the size of the company, but also on other factors, such as the purpose of
financing, the level of financing, the available guarantees, the degree of
company development or the level of financ ial management of the management
team, one or more of these sources.

Revista Economică 70:2 (2018)

19 3.1 The White Paper of SMEs for 2017
According to the White Paper of SMEs report no. XV/2017 – using a
sample of the 827 Entrepreneurs at National Level , for stimulation of funding it
is necessary to follow a few steps, as shown below:
– Diversification and Enhancement of Guarantee and Counter –
Guarantee Services
– Improvement of State -Owned Banking Policies
– Providing seed capital
– Providing micro -grants and micro -credits
– Providing micro -grants and micro -credits
– Providing risk capital
– Measuring medium and long-term financing for the co-financing of
green products
– Removal of all additional declarative obligations
– Centralization of data on products offered by commercial banks
(DAEs, ceilings, eligibility requirements, etc.) on a public portal
– Establishing and promoting, according to the European practice, the
credit mediator for SMEs.
According to the White Paper, 57,51% of the SMEs investigated are
working in the same parameters as they did one year ago, and only 19,61% have
increased their activity, as it is shown in the figure below.
Figure 1. Dynamics of SME activity investigated between October 2015 and
March 2017
Source: White Paper of SMEs report no. XV/2017 , http://cnipmmr.ro/wp –
content/uploads/2017/07/PPT -CA-2017v3.pdf
57.51%22.88%19.61%
SMEs that work in the same parameters
SMEs that reduced their activity
SMEs that increased their activity

Revista Economică 70:2 (2018)

20 Regarding the classification of Romanian SMEs investigated by the White
Paper authors, the structure of firms related to the financing methods of
economic activities, the results are showing that more than half of the SMEs are
self-financing, (74,09%), 24,94% are choosing suppliers loans, and 18,28%
bank loan. Leasing and grant funds represent together, only 12,47% of the
desired financing sources.
Figure 2. SMEs structure by the methods of financing economic activities

Source: White Paper of SMEs report no. XV/2017 , http://cnipmmr.ro/wp –
content/uploads/2017/07/PPT -CA-2017v3.pdf
3.2 The Start Up Nation Program
The Start Up Nation program has been created for those who want to
become entrepreneurs, to support them, to create new jobs, the employment of
disadvantaged people, the unemployed and graduates, as well as to increase
investments in new, innovative technologies.
Under Romania Start -Up Nation 2017, the budget allocated to the de
scheme for the budget year 2017, approved by Law no. 6/2017 of the State
Budget for 2017 is 1,713,798,000 lei. The estimated budget of the de scheme
for the years 2018, 2019 and 2020 is 2,000,000,000 lei / year.
0.00 20.00 40.00 60.00 80.00Self financing
Supplier loan
Bank loan
Leasing
Loans from specialized financial…
Grant funds
Others
Factoring
Share issue on the capital market
Guaranteed loans with guarantee…74.09
24.94
18.28
8.47
4.84
4.00
2.30
1.69
0.97
0.61

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21 According to Mr. Ilan Laufer, Minister for Business, Commerce and
Entrepreneurship, at present , 10,000 files have been verified by the 8 territorial
agencies.
– There have been signed 8,444 grant agreements
– Transilvania Bank approved 1,342 bridge credits
– BCR – 1,214 bridge credits
– CEC Bank – 678 deck credits
– A total of 3,234 approved bridge credits
– Transilvania Bank sent 1,184 files to FNGCIMM and 511 were
approved
– BCR Bank submitted 771 files, 317 were approved
– CEC Bank has sent 718 files and 136 have been approved
– BCR Bank has 443 files in the analy sis, BT has 147 files, and CEC
Bank has 219 files in the analysis
Implementation of the program is expected to provide aid to a maximum
of 10,000 beneficiaries per year. Through the Start -Up Nation program, the state
offers a non-repayable grant of up to 200,000 lei to those who started a business
in 2017. They must not have state debts and create at least one job for the next
two years. Also, the shareholder / associates should not have had other
companies.
Eligible expenditure is for equipment, workspace, cars (partly up to 36,000
lei), IT licenses, space rents, entrepreneurial courses and company site
development and consultancy, both within the limit of 8,000 lei. Salaries are
also offset by the state, within the minimum wage limit.
4. Conclusion
In general, managers do not have the necessary training to deal with the
many problems they face. In small and medium businesses, owners typically
designate a person to be a manager, avoiding the creation of a team of managers.
This means that the manager has to take a wide variety of decisions involving
multiple knowledge, which highlights the inconsistency between the
complexity of the problems he has to solve and the professional training he has.
Lack of financial resources, which limits the possibilities of these
companies to purchase new machinery, proper maintenance, hiring qualified
personnel and motivating them to work, conducting marketing studies,
represent, according to many specialist s, a common cause leading to the
bankruptcy of small and medium -sized enterprises is the insufficiency of
financial resources.

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22 5. References
• Avasilicai, S., Entrepreneurship: Applied Research , Todesco Publishing House, Cluj-Napoca
(2009)
• Cordos, C. R., Bacali, L. and others, Entrepreneurship , Todesco Publishing House, Cluj-Napoca
(2008)
• Marza, B., Serbu, R., Stoica, E., Todericiu, R., The Basics of Entrepreneurship , Promotion of
Entrepreneurship in the University Environment,"Lucian Blaga" University of Sibiu (2012)
• Nicolescu, O., Management of small and medium enterprises . Concepts, applications, methods,
case studies, Bucharest: Economic Publishing House (2001)
• Law 133/1999 on the stimulation of private entrepreneurs for the establishment and development
of small and medium -sized enterprises
• "The White Paper of SMEs in Romania, 2017 ", edited by the National Council of Small and
Medium Enterprises in Romania (CNIPMMR) in partnership with the Ministry of Business,
Commerce and Entrepreneurship, http://cnipmmr.ro/wp -content/uploads/2017/07/PPT -CA-
2017v3 .pdf
• https://startupnation.aippimm.ro