Preferential loans to small business – this is what constantly beginning businessmen think about. If we estimate which customers of banks are listed as the most unreliable and risky (risk for a bank), then we can name 2 categories – these are pensioners and small business representatives.
With the first category, everything is quite obvious. And entrepreneurs from the small business sector are not loved by banks for more complex, complex reasons. On the one hand, a business is capable of generating income that is much higher than the salary of the average classic borrower.
But on the other hand, the main guarantee of the return of finances is the profitability, liquidity and prospects of the business. The income of an entrepreneur is a profit, not a salary (as with a hired professional). Small business in Russia, especially the last 3 years, is burning like dry firewood.
The raw materials orientation of the Russian economy and its conjuncture, dependence on oil prices and ruble inflation lead to the fact that many enterprises become unprofitable. And there is not far to bankruptcy. But a bankrupt is not able to pay the creditor.
Therefore, even with careful analysis of both the enterprise itself and the sector in which it operates, it is very difficult to predict its position in a few years. And most of the loans for opening a small business are taken for a period of 2 to 5 years. A business that has been running for some time, and moreover, successfully, is easier.
There, the beneficiary clearly sees the results of the work of the entrepreneur, a specific profit. It is much more difficult for novice clients whose business has just earned or is still at the stage of a business plan. Helping “business from scratch” is a separate topic.
Options for small business support by the state
And here it is worth telling about how government structures are trying to keep afloat those adherents of small business who have already worked in the market for 1-2-3 years, but because of the systemic crisis, began to “go to the bottom.” Options for government assistance may be several:
- repayment of part of the annual interest on the loan at the expense of funds from public funds (refinancing option);
- the issuance of relatively small sums of money as a “gratuitous state loan”, or more simply, the issuance of money with no obligation of return or interest. But such assistance is provided to far from everyone, not always and to a very limited extent (no more than 300 thousand rubles, which is a miser for many business models);
- assistance related to full state crediting on favorable terms – low interest rate for Russia (from 14% per annum), a wide range of credit limits (from 150 thousand to 150 million rubles) and a long loan period (up to 5-6 years);
- the guarantee of state funds for the support of entrepreneurship, allowing you to take a loan without collateral (can cover up to 90% of the value of a hypothetical collateral). However, this service is not free, funds will have to pay a certain percentage as payment;
- but there is another program that allows settling with the funds-guarantors, again, at the expense of the state budget, leasing with the participation of state structures, allowing young small businesses to acquire all the necessary investment and production facilities — real estate, technical equipment, intellectual products (software ), human resources in the form of high-class specialists.
Business Requirements for Assistance
Each of these points should be considered separately. But first of all it should be noted that in order to receive state assistance of any kind, an enterprise must meet a number of general requirements:
- the entrepreneur should not have any budgetary debts – neither on wages to employees, nor on tax deductions, nor on previously taken state loans, nor on the payment of compulsory insurance;
- the business is engaged in a sector that does not relate to mining, network marketing, trade per se, insurance and credit, gambling, production and / or resale of excisable goods;
- total staff should not exceed 250 people;
- the average annual total income of an enterprise should not exceed the mark of 1 billion rubles (it is calculated as the arithmetic average if the business has been for several years, and it pretends to be around if the business exists for less than 2 years);
- the business has not resorted to any assistance from government agencies over the past 12 months;
- if we are talking about assistance in repaying non-state loans, then such a loan should already be taken, and the borrower should already pay it at least 10%. If an entrepreneur is just planning to take a loan, but asks the state to help in advance, then the only option would be to receive a small amount of money from the state without compensation, but no one would refinance the loan beforehand;
- a business that is on the verge of bankruptcy is considered as a hopeless option that should not be used to transfer the budget, therefore potential bankrupt companies should not be expected to help either;
- Finally, any financial assistance from the state should be very narrow and as strictly targeted as possible – for example, state funds. a loan or financial assistance, every penny should be spent only on large-scale business investments, its radical modernization and expansion – the purchase of new production areas, scientific and technical re-equipment, staff development and so on. To purchase a fleet of vehicles, to replenish working capital, and even more so to spend this money on arranging your own workplace, an individual entrepreneur does not have the right.
Partial payment of credit interest
Government refinancing through the Central Bank is one of the most common options for supporting small businesses. At the beginning of 2017, its rate is 10%. And not all interest is paid, but only:
- one third for those entrepreneurs who took a loan for up to 2 years;
- half if you need help in repaying a loan loan taken from 2 to 3 years;
- two thirds if the crediting period is more than 3 years.
It is worth explaining by example. Suppose SP took a loan of 1 million rubles for 30 months. By contacting the Department of Entrepreneurship Development and the Fund for the Support of Entrepreneurship, he received an approval for refinancing. From 1 million rubles, 10% is 100 thousand rubles. Consequently, this IP can receive 50 thousand rubles from the state for repayment of interest overpayment.
If the interest rate is, say, 25%, then the total amount of annual interest will be 250 thousand rubles. And it turns out that the state will repay a fifth of this amount for the IP. It should be emphasized that this is exactly the annual interest, and not the body of the loan.
Free material support
Contributions that reduce the body of the loan, the entrepreneur makes himself in any case. To many, such assistance will seem miserable on the scale of business problems, but it is much easier to get it than a gratuitous one-time payment of up to 300 thousand rubles or a profitable government loan.
It is extremely rare when a legal entity receives a sum of several hundred thousand rubles for the development of its business just for nothing (albeit for strictly targeted needs). Usually, assistance is exactly the same in the range of 50-100 thousand rubles. But also for a favorable state loan for small business the conditions are very harsh.
To take advantage of these benefits, the company must relate to the sector of the economy, which is currently forced by state policy. These include:
- production of domestic material and intellectual products;
- construction, capital repairs of buildings, utility companies;
- firms engaged in activities closely related to science (pharmaceuticals, IT-technologies, robotics, etc.);
- medicine and social activities.
Firms falling under any of the listed categories are serviced by the state, so to speak, “out of turn”. Free payment can not be truly tangible help. But a full-fledged loan to small business from the state – yes.
Features of government loans and guarantee of funds
Its main advantage is the low interest rate for the Russian Federation, the minimum of which is 14%. True, many experts support their foreign colleagues in the opinion that even such a rate is deadly for small businesses. Abroad, generally accepted rule that the loan rate of more than 10% is guaranteed to destroy any model of small business.
However, the usual rates of Russian banks for entrepreneurs in general are awful – 25% –30% –35%, and sometimes even more. To get a state loan, the borrower will also have to provide a deposit to the bank. And the size of the loan will be equal to somewhere 70-75% of the market value of the collateral. As a pledge here are the objects of the business itself:
- raw material base of the enterprise and goods at any stage of production;
- cooperation agreements with other enterprises (as documents guaranteeing future profits);
- vehicle fleet of the enterprise;
- all areas at the disposal of the entrepreneur;
- technological means of production (technical and computer software).
But it may be that business objects are still in the burden, because they are bought on credit. Or an entrepreneur in a small business cannot lay them out. Then the guarantees can come from the Fund to support entrepreneurship. Such a fund acts here as a guarantor.
His guarantee can cover up to 90% of the value of the collateral. But, as already mentioned, this service is not free. The larger the loan size and the higher the “pledge coverage” of the guarantor fund, the higher the percentage of payment for the services of this fund. Payment varies from 1.2% to 3.2% per annum.
The interest is calculated from the amount covered by the surety’s guarantee. It should not be forgotten that not every bank cooperates with the Entrepreneurship Support Fund. You need to check this in advance. The process of concluding an agreement with 3 parties (the borrower, the bank and the fund) is almost the same as usual.
In case of a positive decision, the bank without the participation of the borrower notifies the fund in order to obtain documented guarantees. And after receiving the money, the borrower immediately transfers to the fund a reward for the rendered service. And even this money is a chance to return, since there is a program for which a one-time and one-time grant is paid from the state.
The size of this payment can be up to 90% of the amount that was transferred in favor of the guarantor. Well, undoubted help for a start-up company is leasing. With the help of such programs, the client can start a “business on credit”, i.e., all business objects will be acquired on credit or rented.
MFIs as the “last straw”
However, in the case of the profitability of the enterprise, most of these objects will gradually become the property of the legal entity. Finally, a separate mention should be made of microfinance organizations. This is what is called the last emergency option, when “pan or gone.” When a company faces bankruptcy, some money is urgently needed from outside, and government assistance is either unavailable or unacceptably slow. Why emergency option? It’s all about the terrifying percentages that MFIs set – from 0.5% to 2% per day of the amount taken.
With fairly large amounts (from 100 thousand rubles) for a relatively long period (for example, a year), the overpayment will be such that the company may again begin to threaten bankruptcy. For example, at a rate of 1% daily for a loan of 100 thousand rubles in 300 days you will have to pay 400 thousand rubles, i.e., 4 times more than what was taken! Sometimes it happens that the MFI is included in the state registry.
Then the terms of the loan will be much more sparing. But there are very few such MFIs.
This article is written as a study material for all those who are interested in the realities of small business in Russia and the options that the government offers to extend the life of small businesses.