A loan with partial write-off is a preferential financial instrument under which the borrower may be partially or fully released from the obligation to repay the principal once the conditions set out in the loan agreement have been met – most often relating to achieving the intended investment objective, creating jobs, achieving environmental indicators or maintaining the business for a specified period.
In practice, this means that part of the liability incurred turns into non-repayable support, which makes a loan with partial write-off a solution similar in nature to a grant, but with greater flexibility and a faster path to accessing funds.
In the current 2021-2027 financial perspective, repayable instruments with a write-off element have become an important complement to traditional non-repayable grants. They are used both at national level (including in the National Recovery Plan (KPO) and government programmes) and at regional level (under the European Funds for individual voivodeships). Below we discuss how these instruments work, the conditions for obtaining a write-off and the situations in which their use is commercially justified.
What is a loan with partial write-off – definition and mechanism
A loan with partial write-off is a hybrid financial instrument that combines the features of a traditional preferential loan (below-market interest rate, long repayment period, grace period) with the possibility of reducing the debt once defined conditions have been met. The mechanism is based on three pillars:
- provision of funds on preferential terms – the interest rate usually ranges from 0% to 2% per year, well below market rates,
- achievement of the objective set out in the agreement – the investment must be implemented in line with the substantive and financial assumptions,
- verification that the write-off conditions have been met – after the investment has been completed and the indicators specified in the agreement have been achieved, the borrower submits an application for a write-off of part of the principal.
The amount of the write-off varies depending on the programme and may range from a few per cent (e.g. 5% for the KPO Loan for the green transformation of cities) to as much as 50% of the loan principal (e.g. for the BGK Accessibility Fund Loan). In some instruments aimed at social economy entities, the write-off may cover 25% to 40% of the value of the principal disbursed.
Loan with partial write-off versus non-repayable grant – key differences
Although the economic purpose of both instruments is similar (reducing the cost of financing an investment from public funds), there are significant operational and legal differences that determine the choice of the right source of financing.
Access to funds
A non-repayable grant is most often awarded in a competitive procedure – applicants compete for a limited pool of funds, and the assessment procedure usually takes from several months to over a year. A loan with partial write-off is granted on a rolling basis until the allocation is exhausted, and the decision to grant financing is usually taken within 14-60 days of submitting a complete application.
Form of disbursement
In many programmes, a grant is paid as a reimbursement of expenditure incurred, which requires the investment to be pre-financed from own funds or a commercial bank loan. A loan with partial write-off is most often disbursed in a single payment or in tranches before the expenditure is incurred, which significantly improves financial liquidity during project implementation.
Competitiveness and predictability
Loans with partial write-off are less competitive than grants, as the access criterion is primarily the ability to repay and the consistency of the project with the programme assumptions, rather than a ranking. For entrepreneurs planning an investment within a specific time horizon, this means much greater predictability.
The most important loans with partial write-off available in Poland
Below is a concise overview of the most significant loan instruments with a write-off element currently operating in the Polish public support system. The full catalogue of available programmes can be verified in the grant search engine.
The “Pierwszy biznes – Wsparcie w starcie” (First Business – Support at the Start) programme (BGK)
A government programme offering loans to start a business. The maximum loan amount is twenty times the average salary (approx. PLN 190,000), with a fixed preferential interest rate, a repayment period of up to 7 years and a grace period of up to 12 months. From 2026, a write-off mechanism of up to six times the average salary is available. The conditions include running the business for at least 12 months from its launch.
Loan from the Accessibility Fund (BGK)
An instrument aimed at financing improvements that increase the accessibility of buildings for people with special needs (lifts, access ramps, ramps, stair lifts). The maximum amount is PLN 5 million over a period of 24 months, and the write-off may cover up to 50% of the principal in the part relating to new improvements.
Loan supporting the green transformation of cities (KPO)
An instrument financed from the National Recovery Plan. It features an interest rate as low as 0% and a write-off of 5% of the loan principal. The minimum loan amount is PLN 2 million, with the possibility of financing up to 100% of eligible costs. The grace period for repayment of the principal may be up to 24 months from the end of the project.
Regional loans from the European Funds 2021-2027
Regional European Funds programmes offer instruments such as a loan for improving energy efficiency with a write-off, a loan for business digitalisation with a write-off or a loan for development investments with a write-off. The conditions differ between voivodeships – the level of write-off depends on the indicators achieved (e.g. primary energy savings above 40%, creation of new jobs, implementation of innovation).
Loans for social economy entities
Under the repayable instruments for the development of the social economy (FERS – European Funds for Social Development 2021-2027 programme), social economy entities can use start-up and development loans with the possibility of a write-off of 25% to 40% of the principal, among other things for delivering social services, accessibility activities or green economy activities.
When is it worth using a loan with partial write-off – decision analysis
Choosing a loan with partial write-off as a source of financing should be preceded by a comparative analysis taking into account the nature of the investment, the financial situation of the company and alternative sources of support. Below are situations in which this instrument is particularly justified.
No non-repayable grant available in the given thematic area
In the current 2021-2027 financial perspective, some areas of support (including energy efficiency in SMEs, digitalisation and the energy transformation of cities) are largely financed through repayable instruments. If the planned investment does not qualify for any grant call, a loan with partial write-off may be the only realistic way of obtaining a non-repayable element of support.
The need to launch financing quickly
The assessment procedure for a loan application is considerably shorter than for grant calls. For projects that need to start by a specific date (e.g. one resulting from the schedule of commercial contracts or technological requirements), this is a decisive argument.
Limited capacity to pre-finance the investment
Disbursement of the loan before expenditure is incurred makes it possible to avoid committing significant own funds or taking out an expensive bridging loan, which is typical of reimbursement-based grants.
Low tolerance of competition risk
In grant calls, even a well-prepared application may not receive funding due to limited allocation or strong competition. A loan with partial write-off – provided the criteria are met – offers much greater certainty of obtaining funds.
The investment generates measurable effects that qualify for a write-off
If the planned undertaking by its very nature meets the write-off conditions (e.g. a renewable energy (RES) investment generating significant energy savings, a project creating new jobs, the implementation of innovation), a loan with partial write-off becomes an instrument with an effective cost close to that of a grant, but with a simpler procedure.
When a loan with partial write-off is not the optimal solution
Despite its many advantages, this instrument does not work in every situation. Before making a decision, it is worth considering the following limitations:
- the investment does not generate cash flows sufficient to service the debt in the part not subject to the write-off – despite the preferential interest rate, the loan remains a repayable liability,
- the applicant does not meet the creditworthiness criteria or does not have sufficient collateral required by the financial intermediary,
- a non-repayable grant with more favourable parameters is available in the given thematic area (a higher level of funding, no repayment obligation),
- the nature of the investment does not allow the write-off conditions to be met, which means that the instrument functions solely as a preferential loan.
Conditions for obtaining a write-off – what to look out for when concluding the agreement
Using a loan with partial write-off effectively depends on a precise understanding of the conditions contained in the loan agreement and the rules of the financial product. The most common requirements include:
- timely completion of the investment and submission of documentation confirming that the purpose of the loan has been achieved,
- achievement of physical and financial indicators (e.g. energy savings, number of jobs created, implementation of innovation),
- maintaining the effects of the investment during the durability period (usually 3 to 5 years),
- running the business for the minimum period specified in the agreement,
- correct settlement of expenditure in line with the catalogue of eligible costs,
- submission of the write-off application within the deadline and in the form specified in the agreement.
Failure to meet the write-off conditions means an obligation to repay the full amount of the loan on the terms set out in the agreement, which represents a significant operational and financial risk.
Loans with partial write-off and State aid
Loans with partial write-off granted from public funds generally constitute State aid or de minimis aid. The form of aid is of considerable importance for the support limits that a given entity may obtain.
De minimis aid is subject to a limit of EUR 300,000 over three years, calculated on a rolling basis, in accordance with Commission Regulation (EU) 2023/2831. State aid other than de minimis is subject to stricter conditions, including the incentive effect requirement and a specific aid intensity depending on the location, size of the company and nature of the investment.
The legal basis for granting aid follows from the rules of the given instrument. Where a programme allows different forms of aid, the choice should be preceded by an analysis of the limits already used and the projects planned for the future.
How to prepare to apply for a loan with partial write-off
The application process consists of several stages that require the preparation of appropriate documentation and compliance with formal requirements.
Stage 1 – identifying the right instrument
You should verify the availability of loans in the given voivodeship and thematic area. A helpful tool here is the grant search engine, which aggregates current calls and repayable instruments.
Stage 2 – analysing the product conditions
You should read the financial product fact sheet, the rules and the template loan agreement, paying particular attention to the write-off conditions, the catalogue of eligible expenditure and the required collateral.
Stage 3 – preparing the application documentation
The standard package includes the loan application, a business plan or feasibility study, registration and financial documents, documents confirming SME status (if required), certificates confirming no arrears in public-law payments and collateral documentation.
Stage 4 – submitting the application to the financial intermediary
Applications are submitted to the financial intermediary selected by the fund manager (most often BGK or a regional development fund). The list of intermediaries financing a given instrument can be found on the website of BGK or of the managing authority of the regional programme.
Stage 5 – settling the loan and applying for the write-off
Once the investment has been completed, documentation confirming that the objective and indicators have been achieved must be presented, followed by the write-off application within the deadline specified in the agreement.
Due to the complexity of the procedures and the need to match the documentation precisely to the programme requirements, many applicants use grant advisory services covering repayable instruments as well.
Summary – a loan with partial write-off as part of an investment financing strategy
A loan with partial write-off is an instrument increasingly used in the Polish public support system, particularly in areas where managing authorities have decided to limit non-repayable grants in favour of repayable instruments. For entrepreneurs and other entities eligible for support, this means taking a broader view of the structure of investment financing and treating preferential loans as an equal source of capital alongside grants.
Of key importance are the right choice of instrument (level of write-off, interest rate, access conditions), a realistic assessment of the ability to meet the write-off conditions and proper preparation of the application documentation.
In case of doubt, it is worth verifying the current offer of financial instruments available on the websites of Bank Gospodarstwa Krajowego (BGK), the European Funds Portal and the relevant managing authority of the regional European Funds programme.
If you are planning to apply for a loan with partial write-off or another form of funding, it is worth verifying in advance the eligibility of the investment, the availability of instruments in the given region, the write-off conditions and the required collateral.Contact an expert
Available instruments can also be checked independently in the free grant search engine with an AI Assistant.
Author: Dariusz Kozakiewicz
EU funding expert