Russian business abruptly stopped taking loans for development this spring: according to the latest data from the Bank of Russia, in April this year, legal entities and individual entrepreneurs borrowed 4.77 trillion rubles, which is 10% less than in March, and 38% less than in March. than in April last year. But the need for import substitution and the closure of vacant niches in the domestic market, along with a decrease in the key rate, will definitely reverse this trend, experts say. Artem Moskalev, co-founder of the IVITECH financial platform, talks about the sources from which it is easier for a small business to obtain financing.
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Need more funds
Last year, 58% of small and medium-sized businesses were forced to seek additional funding, RBC reports. It is interesting here that 27% of respondents did not use the usual banking products, but borrowed money from friends, relatives or other individuals, it turned out as a result of a joint study by Promsvyazbank, Opora Rossii and Magram Market Research.
Various small business support programs have been and are, but usually only companies that meet certain parameters can receive the coveted funds for development: a certain level of revenue, positive financial results, net assets, and so on.
And since March 2022, many organizations have simply stopped issuing loans to businesses. Now, of course, the panic has dissipated, but nevertheless, if earlier the company could apply for a loan of 2 million rubles without collateral, now no one will offer it such conditions. But the need of the business itself for borrowed funds has not decreased, and on the contrary, many companies need even more funds to scale production. There are three paths an entrepreneur can take.
Sources of financing
Here, it would seem, everything is simple. Many special anti-crisis lending programs for small and medium-sized businesses are now being declared. You can get money for the purchase and repair of equipment, reconstruction of premises, refinancing of previously taken funds, and much more. But there are limitations, they may vary depending on the specific program, but In the basic version, the following is important:
- the business is registered in the Russian Federation and included in the Unified Register of SMEs;
- revenue for the last calendar year does not exceed 2 billion rubles, and the number of employees is 250 people;
- there were no wage arrears;
- there was no debt on taxes and fees (or it did not exceed 50 thousand rubles);
- The company was not in bankruptcy.
In fact, many entrepreneurs borrowed funds are needed just to keep the business going, and if such an option could be indicated when filling out an application for a loan, it would be indicated very often. For example, there is a task to build a warehouse for 25 million rubles. You go to the bank, but if you cannot provide the appropriate collateral or fall under any restrictions, the bank will either not give money or approve a loan in a much smaller amount – and then you will have to go to private investors.
It’s like borrowing, but not from a friend or relative, but from the same entrepreneur, but more successful. Large businesses, and sometimes even medium ones, invest in promising start-ups and start-up companies. Here the procedure is somewhat simpler than in a bank, and sometimes a well-written business plan may suffice. But this option also has its downsides.
Firstlyin our country, the venture investment market is not as developed as abroad, which significantly reduces the pool of possible partners. Secondly, the payment for development under the patronage of a larger company will not be a percentage of the amount taken, but a share in the enterprise. And finally, venture is long.
It is important to understand that a venture is needed when there is something inside your project that implies some kind of change. This may be the creation of a new market or a business model that will change it. A simple example is taxi aggregators: the transportation services themselves have remained the same, but the model of their consumption has changed radically. But if we talk about a classic business that serves the needs of people – buying coffee, refueling, washing a car, printing pictures on T-shirts – this is not about venture at all.
Business is highly dependent on one type of financing or another. If you are big and have a lot of money, you can apply to a bank or a fund. If the company is small and needs money urgently – to scale or at least survive – the only option is private equity. There are various kinds of fintech projects that help in financing small businesses. But today, due to economic instability, super-long delays have appeared – not 60 or 70 days, as it was, but up to a year. And the entrepreneur understands that he has done the work, but he will receive payment for a very long time. This is the situational request.
Exist tools that allow a company to receive financing simply for the existing relationship with debtors, buyers. But in Russia they are not very good at working with them – this creates the basis for the emergence of specific fintech startups like ours. They enable businesses to quickly receive money for current needs. An obvious plus is that everyone can apply for private investment. And there is also the opportunity to work flexibly with any specifics. For example, there is a lot of private investment in the taxi market: individuals buy cars and give them to management.
And since the business model of the taxi fleet itself is difficult to calculate, banks often refuse loans. We use advanced scoring and therefore are ready to provide funding for specific purposes.
Trends and prospects
In general, recently the share of companies providing alternative financing has grown significantly. Scoring institutions are proliferating. There are guys who are trying to do interest-free installments for business, a la carte “Halva”. In one form or another, they get it. There are industry-specific solutions – so far, for the most part, they are for marketplaces.
Some fintech startups that used to be only in Russia are now re-qualified for the European market. Despite the regional specifics, b2b relations are approximately the same everywhere, and there is a demand for such products everywhere. In general, the alternative financing market is one of the fastest growing now, although it is still small in itself. Corporations are starting to show interest and invest in it, but the status quo will change in three years, not before.