Small business support

The Government of the Russian Federation has developed a list of instructions to the ministries, aimed at supporting of small business and private enterprises. The work was carried out on the basis of the May report of B. Titov, the authorized at the president to protect the entrepreneurs rights, to V. Putin. 

The main part of orders touch the regulation of government procurements (under the 44-FL). To the end of October the Ministry of Economy, Ministry of Finance and the Federal Antimonopoly Service are set a task of developing new guidelines for the formation of procurement lots with non-inclusion of unrelated goods and services. The current requirement eliminates the large number of small, specialized firms from bidding.

Besides it was ordered to consider an exemption of the requirements to secure an application for medium-sized companies already working on government contracts over the last three years (if the contract amount does not exceed 3 mln RUB).

In order to attract a significant number of small companies for bids, small businesses need to see financial sense of participation in the procurement. For this it was proposed to increase the maximum size of the contract price for suppliers in this category from the current 20 mln RUB to a more substantial sum. 

Another section is devoted to the definition of the cadastral value. The Ministry of Economy was ordered to adjust the work of the commission for disputes on the cadastral value. Now it is required to provide the appraiser’s conclusion, which often costs several million rubles. However the Commission often does not take this conclusion into account and assesses the object on its own. It is proposed to cancel the obligation to provide a report, or to oblige the Commission to accept that conclusion.

The list contains instructions to the Central Bank and Ministry of Finance to consider measures of lending support to small businesses. In particular, on reduction of risk factors of such loans, and the introduction of micro-loan securitization*. 

*Securitization - financing of certain assets through the issuance of securities. The word comes from the English «securities».

Whether new instruments of attraction of liquidity to the industry will function?

Industry Development Fund (IDF) and the Ministry of Industry and Trade are preparing a new instrument of the support of domestic businesses through leasing schemes, including with the help of the Central Bank (CB). The industrial companies engaged in the implementation of the policy of import substitution may count on support.

The fund with the volume of 20 bln RUB was established in 2014 to support the import-substituting industries, and we can already talk about some of the results of its activity. In particular, enterprises received loans of 12.28 bln RUB under the attractive 5% per annum (taking into account the high cost of borrowings on the open banking market and limitation of western instruments of attraction of liquidity due to sanctions).

However, the question of leasing support is still open: there are no funds for initial payment to a lessor in the import-substituting industry, and it is 10% -50% of the cost of equipment. IDF plans to allocate loans of 5-250 mln RUB at the rate of 5% per annum for up to 5 years, it can be financed from 10% to 50% of initial payment. The idea to use the preferential leasing has been already approved by the supervisory board of the fund. 

The program should be started before the end of the current year. The priority will be given to the purchase of Russian-made high-tech equipment for the engineering industries (oil and gas, tool-making, electric-power industries etc).

The second direction is the support of leasing companies with the help of the CB. The fund offers the Central Bank to grant funds to leasing companies through banks. It is discussed with the Central Bank the allocation of up to 10 bln RUB for it and provision of money to banks at 9.5% per annum.

If it will be able to put into action the suggested instruments, it will let reduce Russia's dependence on foreign supplies of machine tools, machinery and other equipment, which import occupies a significant share in its goods structure.