On lending to medium and small businesses in 2019-2020 in Russia
Today it is difficult to imagine the development of a business in Russia, especially a beginner, without borrowing funds. And, if large enterprises can get a loan in 2019-2020 without any problems due to the stability of their income, then small and medium enterprises may encounter some difficulties in lending.
Entrepreneurs do not always possess information about the services provided by banks. This article provides a brief overview of the services provided by banks for lending in 2019-2020.
If the company needs to replenish working capital, upgrade or purchase production equipment - in this case, a loan can be issued. This is mainly a line of credit or the so-called. overdraft on the current account provided for a period of not more than 3 years.
To ensure this type of loan in 2019-2020, the bank may require a security deposit. As a pledge, an enterprise may provide its own property, goods in circulation or securities. A third party guarantee is also possible. It should also be borne in mind that when evaluating collateral, the bank evaluates the property with a decreasing coefficient of 0.4 - 0.8.
Currently, a loan can be repaid according to two main repayment schemes - differential or annuity.
Differentiated payments - a monthly decrease in the loan repayment amount, since interest is calculated on the balance of outstanding loan funds.
Annuity Payments - repayment of the loan in equal amounts over the entire loan term.
This type of loan is essentially similar to a mortgage issued by individuals. But as an object of acquisition can only be premises intended for the conduct of business activities of the enterprise. In addition, the Law "On Mortgage" regulates and hinders the acquisition of commercial real estate, which led to the development of several schemes of commercial mortgages.
The term for which a commercial mortgage is granted can reach 10-12 years, but rarely exceeds 5 years.
The initial payment for the acquired property is paid by the buyer in the amount stipulated by the contract. After signing the contract of sale, the seller of real estate is paid the full amount of its value. The premises that are acquired are pledged by the bank. Until the mortgage has been paid, the premises cannot be sold.
Sometimes enterprises plan to develop a new area of activity, implement new projects or significantly expand production. But own funds for the implementation of these plans may not be enough and the company resorts to obtaining borrowed funds, obtaining a so-called investment loan. A loan can be issued by both a bank and an investor. At the same time, as a rule, the bank’s goal is to make a profit in the form of interest, the investor’s goal is cooperation, which involves making a profit from investments.
Often, an investment loan is usually given for a period of up to 10 years, but at the same time, the borrowing company needs to make part of its own funds.
This is perhaps the only type of lending for which funds can be obtained in 2019-2020, when providing a business plan that should be convincing, reflect the real situation on the market, reflect the need for additional funds, be consistent with the activities of the enterprise, clearly reflect the chronology receipt and expenditure of funds, whether the timing of the return on investment is clearly indicated, etc.
Special types of lending 2019-2020
This is the so-called financial lease. An enterprise may apply to a leasing company for the acquisition of property that is necessary for economic activities, while paying an initial contribution of 20-30%, the ownership of this property will transfer at the end of the lease agreement and after payment of the full value of the property, including interest.
The advantage of this type of lending is the simplicity of drawing up a leasing agreement. For this, it is necessary to provide only the balance sheet of the enterprise and the profit and loss statement. One of the minuses of leasing is that in case of non-compliance with the leasing agreement, the lessor can withdraw the property, because he is the owner of the property.
Letter of credit and factoring
These are special types of loans, which are often issued during the implementation of foreign economic activity.
When issuing a letter of credit, the bank pays the suppliers of goods the amount of the debt of the borrowing company after the suppliers have submitted documents, which confirms the fulfillment of contractual conditions. The deadline is up to 1 year.
When factoring, the bank pays the creditors of the borrowing company the amount of debt, while reducing the time gap between the sale of goods and receipt of payment from the buyer. Many banks, one of the conditions for this type of lending involve a long-term cooperation with the bank. The deadline is up to 90 days.
From the video, find out what pitfalls exist when lending to a business in Russia, and also whether it is worth taking a loan in 2019-2020 or not: