Andriy Khudo: Banks are a growing business’s best partners

How complex is the financial organization of your business, given that it is a holding comprising assets in different industries?

We take an individual approach to each business. When we first started out in 2007, in addition to our own funds we actively used bank loans. We invested working capital in restaurants, returned it and then went on to invest in other restaurants. From a financial management point of view, I understood that it was wrong to place working funds in capital investments. But the payback period for some of our assets was only a few months! And so I could afford to take the risk.

At this stage, we try to combine own capital investments and bank loans. I prefer to pay the bank to share all the challenges of a certain project with it. In order to grow fast, businesses need partners. Within our strategy, we have chosen banks, not private lenders, to be partners. Сlear terms and precise financing rules are the advantages the banks have. If the rules of the game suit both parties, cooperation works out perfectly. Moreover, partner banks ask the right questions, they monitor financial statements, that is, they carry out checks that businesses can use. It's always good to have an extra pair of eyes watching your business.

What were the terms you got your first loan under?

Pledge. The loan was provided to us by Bank Lviv – a local bank in the western region. How come? Because this bank was flexible, I had known its owner, and since we were unable to cover the loans with real estate, the bank took both the equipment and the corporate rights of the company - everything we had - as collateral. That is how we launched "Kryivka". The bank loan gave us the opportunity to start.

The fact that you hold assets in the restaurant and hotel business, light industry, and publishing business - you have over 20 active projects - indicates a breadth of business interests or a pragmatic diversification of financial risks?

In addition to those named, it is also a matter of luck. When you come across ideas that you want to invest in, and partners you trust, you buy in.

What is the gearing ratio you use for business development?

We are actively reinvesting. I'm trying to keep a 50/50 ratio. At this point the value of credit financing is usually acceptable. Plus, the risk is then shared by the two parties equally.

Given your experience of working with three banks: Raiffeisen Bank Aval, OTP Bank, and Bank Lviv, what do you look at when choosing financial institutions to work with?

I think it is worth cooperating with at least three banks. This way, the business feels more at ease, having a diversified credit base. I mainly choose banks with foreign capital as I believe they have clear rules of the game and well-established procedures. But the main criterion is the cost of the resource and the bank’s flexibility. For example, Raiffeisen Bank, and now Privatbank which we are negotiating with, offer a competitive credit resource, and, say, OTP has become expensive. When the credit resource cost exceeds 20%, it becomes a burden for the business.

You also had negotiations with the Austrian branch of Raiffeisen. However, you are cooperating with its Ukrainian unit. Which credit conditions in Ukraine have played in favor of a decision to borrow from Aval?

We were just comparing. I would never allow myself to take foreign currency loans and invest them in the hryvnia business. Now, we are selling green coffee beans: we buy coffee in Latin America and sell it in Ukraine and Europe. If you re-export coffee to Poland, where prices are in euro, a dollar loan might be considered. But it makes no sense when you are selling to customers in Ukraine.

I have to say that dollar loans are quite competitive in Ukraine. We have a rather insignificant demand for foreign currency loans, so the rates on these can be quite interesting.

Since 2014, the banking system has undergone significant transformations. Having worked with banks for over 11 years, do those changes affect your business now?

The market has indeed cleaned up, and those who stayed will earn a good deal. Banks have become more healthy, and their credibility is being gradually restored. If this trend continues, it might bring about a release of Ukraine’s domestic financial resources. And I dare say we may find ourselves surprised by just how large they are.