Ukrainian toy manufacturer attracting European investments

Roksolana Vakulenko, director of Vip-Toys - company that Toys launched the production of children's toys with EU4Business Support

Two years ago, Vip-Toys launched the production of children's toys in the city of Rivne in Western Ukraine, operating under the Doloni-Toys trademark. Production immediately began to grow rapidly. The range of goods was initially small, with the company producing and selling just four types of toy, employing 15 people and with two pieces of equipment. Now, the range includes dozens of items, with 65 people operating 14 machines. The volume of the company's output over the past year has doubled, with exports accounting for 80% of all sales.

Affordable loans for the purchase of new equipment

Over the past year, Vip-Toys has taken out a string of loans for the purchase of new equipment.

"All of them are investment loans, namely loans for the purchase of production equipment," says the director of the company, Roksolana Vakulenko. "We have purchased equipment for the manufacture of plastic toys and goods for children, thereby significantly expanding the product range and capacity of the company."

The company received affordable loans in parallel from two sources.

"We have one loan under the EU4Business programme with the German-Ukrainian Fund. This programme partially compensated our interest – we received this loan at 14.85% per annum. Such low rates are simply not available in Ukraine. We took another four loans under the EU4Business programme with the European Investment Bank. This programme provided us with preferential terms on collateral requirements. The interest rate was in the range of 19% to 20%. In this way, with the help of the EU programmes, we obtained all the necessary funding for our development projects," says the company's director.

Indeed, entrepreneurs often do not take loans, deterred by the high interest rates. Small and medium-sized businesses also lack sufficient loan collateral. These two hurdles stand in the way of growth, the development of new products, and the creation of new jobs.

It’s a problem highlighted by Valery Mayboroda, acting Head of the German-Ukrainian Fund:

“Often, entrepreneurs, while trying to expand their business, face the same problem – they cannot obtain the required loan amount at favourable rates, because they cannot provide enough collateral for the bank," he explains. Indeed, if you plan to ramp up production capacity, you need money for development. And a loan should not become a crippling burden. In such cases, it is the SME support programme of the German-Ukrainian Fund that comes to their aid, providing concessional loans in conjunction with loan guarantees from the European Investment Bank under the EU4Business initiative.

New equipment for business expansion

For the most part, Ukrainian children's toys under the Doloni-Toys brand are exported to the countries of the European Union and Belarus.

"The first year, it was difficult for us to work with Europeans," admits Roksolana Vakulenko. "After all, we had a small product range, and potential partners did not trust us. It took some time to overcome these barriers. But now we have entered the export markets. In order to work with foreign partners smoothly, you need to know their standards and requirements for the goods," explains the director of the company. "We stick to all European requirements, use high-quality European raw materials and develop safe designs. Therefore, certification is not a problem for us."

However, Europeans test toys very rigorously – the test methods are laid out over hundreds of pages. For example, the company had to test a children's slide. European laboratories clearly defined the required width and the length of the steps and the angle of inclination, and whether the slide can hold the weight of a child, etc. There are many requirements, and they are mandatory.

The director of the Ukrainian company adds that the procedures are complex, but that compliance is essential for the company's reputation: "If you are a manufacturer certified by the European Union, then clients will not be afraid to cooperate, to buy your products."

"We have a great ambition," Roksolana Vakulenko says with a smile, "that every child in the world will play with our toys. We see the great company Lego developing. Our goal is to be as good as they are."

And it makes sense to be inspired by the best in the industry.

"The story of Roksolana and her business, Doloni-Toys, is quite typical for Ukraine," says Valery Mayboroda of the German-Ukrainian Fund. "There could be a good idea, a cool product, but not enough funding to take it to the next level. And SMEs find it the most difficult to get loans, since banks need to spend more on their business model and risk assessment when investing in new industrial solutions. At the same time, the banks' revenue from such lending is lower compared with lending to large companies. Therefore, our Fund provides not only affordable lending to its clients, but also trains partner banks to effectively evaluate small and medium-sized entrepreneurs who are planning investment projects."

According to the German-Ukrainian Fund, the enterprises in the processing industry have the greatest investment need for the modernisation of their equipment. These enterprises produce a domestic product that, in turn, contributes to the financial stability of the country.

Ukrainian businesses should not be afraid of taking out loans. Moreover, the European Union provides real opportunities for Ukrainian SMEs in order to develop intensively. Ukrainians have all the preconditions to compete not only on the national market, but also far beyond its boundaries, on the international markets.