Online loans for small businesses

According to the Federal State Statistics Service data, the share of small and medium-sized businesses in Russia’s GDP amounted to 21.9% in 2017. More recent data has not been published yet.

The development of small businesses directly depends on the financing sources. Getting loans is a very complicated procedure for small business. It often happens that the bank credit programs for start-up entrepreneurs are inaccessible due to strict requirements and lack of collateral; they also are too expensive due to high loan rates.

The alternative to bank loans is non-bank lending, the market of which is growing rapidly. Thus, according to the Central Bank of Russia data, the general growth of small businesses lending in 2017 amounted to 15% in comparison with 2016. In 2018, the growth amounted to 11% compared to the previous year.

There are government programs to support and subsidize business and new serious players. Government programs appear to support and subsidize business, as well as new serious players. Banks, in turn, are also creating alternative platforms for financing small businesses.

The development of non-bank lending is also facilitated by the growing financial technologies industry, which helps to get rid of paperwork; save time on visiting banks and receive money in the shortest period.

Further growth of alternative crediting of small business in Russia is predicted.

Under Russian laws, currently the only legal way of non-bank lending of small businesses and entrepreneurship is a microfinance activity. The legal basis of microfinance activity is determined by the Federal Law №151-FZ dated 02 July 2010 «On microfinance activities and microfinance organization». The same law regulates the size, procedure and conditions for granting microloans, the procedure for acquiring the status and activities of microfinance organizations as well as the rights and obligations of the Central Bank of the Russian Federation in this area.

In particular, the Central Bank of the Russian Federation registers the microfinance organizations (MFO) of entrepreneurial financing and maintains the relevant State register. As of 08.11.2019, 210 organizations are registered in the State register. Most of MFO have the relevant on-line services and usually provide loans only up to 100 or 300 thousand RUB. Some organizations offer larger amounts on the basis of assets availability, long-term cooperation and fair fulfillment of debt obligations by the borrower. The potential loan recipients need to meet the minimum requirements, such as:

• Russian citizenship;
• passport and permanent registration on the territory of the Russian Federation;
• age over 18 years;
• provision of well-thought-out business plan;
• the presence of liquid assets and the absence of third-party debt obligations are desirable.

The advantages of applying to MFO:

1. short term of collection and submission of necessary documents;
2. microloan on business development could be obtained almost in a day of treatment with minimal document package;
3. interest rates are maximally open, there are no additional fees, free service is available;
4. approval of loan applications is very fast, usually within a day;
5. availability of various options for cash withdrawal and repayment of debts (bank cards, payment terminals, E-money, mobile shops etc.).

Among main disadvantages of obtaining microloans in MFO are:

1. often higher interest rates in comparison with interest rates of banks;
2. limited maximum loan amounts;
3. short terms of borrowing.

Among main financing sources of MFO are:

1. acceptance of deposits from the population (the minimum deposit from an individual is 1.5 million RUB);
2. bond loans (used only by the largest MFO);
3. attraction of foreign funds financing (extremely rare);
4. raising of funds in cooperation with banks (on the basis of MFO affiliation with a particular bank);
5. attraction of private Russian capital (main for 70% of MFO).

According to the Information and Analytical system Globas, currently there are more than 1800 active microfinance and microcredit companies in Russia.

Information about these companies and their activities is available for Globas users.