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Small businesses are going into hiding
In August of this year, banks reduced their lending to small and medium-sized businesses (SMEs) to 1.31 trillion rubles, the lowest figure since the beginning of the year. The following month, the problems also became fewer. Companies are reducing their business financing due to high interest rates and difficulties with cross-border payments. In this situation, SMEs are turning to other financing options, especially through leasing and factoring.
According to the Bank of Russia data published on Tuesday, October 15, the volume of loans to small and medium-sized businesses at the end of August amounted to only 1.31 trillion rubles. This is the lowest result since February (1.22 trillion rubles). In the reporting month, fewer than 224,940 enterprises received loans, which is the minimum amount for the year.
Moreover, although the decline lasted for three consecutive months, loans to small and medium-sized businesses actually increased in the summer over the past two years. Specifically, the three-month growth rate reached almost 42% in 2022 and more than 27.5% in 2023.
The negative situation in this lending sector is caused, first of all, by high interest rates. According to Kommersant's sources from large banks, the current interest rates "are no longer affordable for small and medium businesses." As of the end of the reporting month, small and medium businesses can receive loans from banks at 18.45% per annum for loans up to one year and 17.64% per annum for loans over one year. At the same time, depending on the purpose and amount of the loan, based on public offers on the bank's website, the interest rate can reach 25% per annum. "Banks are ready to lend to small and medium businesses because their capital constraints are covered by the margin, but businesses do not accept such a price. And even at current interest rates, companies ready for takeover may be rejected. At current interest rates, the risk of default increases, and banks are being cautious," explains Kommersant's source. Companies have cut spending on areas and projects that previously used credit funds. "Despite the fact that, as in the case of consumer loans, banks are now extending loan terms in order to reduce payment amounts," says Olga Blednova, head of the practice of providing consulting services to companies in the financial sector. From servicing. The situation is not saved by preferential lending programs for small and medium-sized businesses. Accordingly, the Ministry of Economic Development is implementing the preferential lending program "1764", which provides loans with a base interest rate of +2.75% and a base interest rate of +3.5% to small and medium businesses.
According to Alexander Saraev, Director of Valuation Activities at Expert RA, the decline in small and medium-sized business lending in September and the first half of October slowed down compared to the summer period amid an active business season. However, the high cost of borrowing "remains the main obstacle to attracting new financing," he notes. Moreover, in mid-September, the central bank once again raised interest rates to 19% and did not rule out further increases. "Also, in addition to the level of interest rates, the reduction in emissions could have been affected by the lengthening of the settlement chain when settling accounts for foreign goods," says Konstantin Borodulin, Director of the rating agency Financial Institution Ratings (NRA).
Against this background, experts and market participants note that banks are increasingly using other methods of financing small and medium businesses, especially leasing and factoring. However, rental rates have proven to be too high for businesses to date (see Kommersant of October 3). Growth continues only in the factoring sector, where the impact of high interest rates is not noticeable due to the short term of the contract - about two months (see Kommersant of October 8).