First guarantees - then money

Banks do not hurry to meet individual entrepreneurs

The volume of credit funds, which individual entrepreneurs attract, remains insignificant. Meanwhile, the low level of loans hinders the development of the entire economy of the country as a whole, because namely small and medium-sized business (and entrepreneurs are essential component of it) should become the driver of a new economic growth. But banks are ready to change their position in exchange for particular guarantees - both from the state and from the private sector.

Debt load is high, discipline is lax. According to the data of the Joint Credit Bureau, only 10% of individual entrepreneurs registered in Russia have active bank loans (according to the Information and Analytical system Globas®, there are 3,8 mln individual entrepreneurs in Russia as of the 7th of July). At the same time, the level of debt load by those who have unliquidated obligations is high: an average of 2,7 credits with a total debt of more than 2 mln RUB is accounted for each such individual entrepreneur. As a consequence, payment discipline of entrepreneurs is low: more than a quarter of them do not pay on their credit obligations on time, and 21% of loans are in default status (overdue is more than 90 days). The tendency of the reduction of credit granting is credit reduction is typical not only for individual entrepreneurs, but for the entire small and medium enterprise (SME) sector. According to the "Expert RA" agency, banks issued 5,3 trillion RUB to representatives of SME in 2016, that is by 3% less than in 2015.

The decision is negative. Commercial banks became the main obstacle on the path of individual entrepreneurs to credit resources, whose position on this issue is well known. Instability in the receipt of income, as well as the complexity of their forecasting are the main arguments for making a negative decision on credit granting to individual entrepreneurs. In addition, many registered individual entrepreneurs are not entrepreneurs in fact, they do not conduct economic activities, are created for saving in taxes or cashing in of money. As a result, issuing loans to individual entrepreneurs becomes for banks too risky and unprofitable.

Where there’s demand, there’s no supply. A number of entrepreneurs solves the problem of raising borrowed funds by obtaining consumer loans, that in practice is often easier and faster. However, it can not even partially solve the problem of the requirement of individual entrepreneurs in borrowed resources. The favourable credit facility for SMEs («Program 6,5%»), implemented since the end of 2015 by the SME Development Corporation (we wrote detailed about this in the Article "In chase of easy money" from 27.03.2017) does not solve the problem. Against the background of the number of loan applications from individual entrepreneurs, which increased by almost 1,5 times for the last year, the amount of approved decisions decreased. The loans, which are provided yet, are issued at over- and nonbeneficial rates for entrepreneurs.

Strong guarantees. In the current situation banks, having the final say in making a decision to grant a loan, are ready to meet individual entrepreneurs only under the sole condition – the provision of strong guarantees for timely and high-quality fulfillment of obligations. And only the help of state is not enough here. In order to obtain full access to the borrowed capital market, individual entrepreneurs must become more open and transparent, they will have to get rid completely of shadow accounting, and also learn how to plan their activity in such a way that their ability to receive constantly income and, therefore, make obligatory payments, will not cause doubts by banking sector.

The question of due diligence when concluding contractual obligations with individual entrepreneurs is actual not only for banks, but also for all economic entities. An effective way to prevent the risks of cooperation with an unreliable business partner is the use of the Information and Analytical system Globas®, which contains information on more than 24 mln legal entities and individual entrepreneurs.