Arrears on loans to small businesses has passed the peak

Small business lending collapsed in 2014, more than a third, it seems, started to come alive. According to the Bank of Russia, in June banks issued small and medium-sized businesses loans for 505 billion rubles or 34% more than in may, and 7.6% more than in the same month last year. As a result, the issuance of new loans in the first half of 2016, almost caught up with the corresponding figure for the middle of last year — 2,446 trillion RUB against 2,460 trillion, although is only two-thirds from the record levels of two years ago (more than 3.8 trillion).

Due to the June loan growth started to decrease the level of overdue debt on loans to small and medium businesses after nine months of continuous growth (see chart). The share of overdue debt decreased in June by 0.4 percentage points to 15.2% of the portfolio, and the amount of 15 billion RUB (up to 705 billion), follows from statistics of the Central Bank.

Nevertheless, SMEs remain the most problematic category business borrowers in General corporate credit portfolio the share of arrears now stands at only 6.8%.

“Indeed, in June, there was a decline in the share of overdue SME [small and medium-sized enterprise] 0.4 percentage points — up until this last decrease was observed already in the distant September of 2015”, — said Chairman of the Board SME Bank (a Bank specializing in supporting small and medium business) Dmitry Golovanov. But to say that this change of trend is premature: “the decline appears to be relatively insignificant.” In SMEs the Bank believe that further significant growth in the share of bad loans in the SME segment will not be, and it will drift in the region of 15%. A more significant reduction in delay will be possible, when accelerated economic growth and, in particular, will increase consumer demand. It will happen in 2017, predicts the Bank.

The payment discipline of the entrepreneurs has improved, say bankers interviewed. “In our opinion, radically changed the logic of the financial settlement between counterparties. Borrowers have become a more responsible approach to verification of contractors, as well as order and terms of calculations,” — said the head of Department on development of products for small and micro business of Bank “GLOBEKS” Anna Storozheva.

From Chukotka to Ingushetia

2.4% of the arrears on loans to SMEs in the Chukotka Autonomous district; the lowest figure among the regions of Russia (however, there is the debt of SMEs low — a total of 997 million rubles.).

2.7% of the arrears on loans to SMEs in Chechnya (the total debt of SMEs in the country — 15.5 billion rubles.).

88,5% of the arrears on loans to SMEs in Ingushetia (total debt of SMEs there is 2.7 billion rubles), the highest figure in Russia.

38% of the arrears on loans to SMEs in the Republic of Kalmykia (the total debt of 6.1 billion roubles), the second after Ingushetia indicator.

Rates are reduced, but slowly

The availability of financing in the segment of small and medium business “has improved markedly”, previously shown by the study “Support of Russia” on the index of business sentiment of small and medium enterprises for the second quarter of 2016. 55% of respondents (against 45% in the previous quarter) indicated ease of obtaining loan, and the number who fear that in the third quarter of raising money will be difficult, dropped from 39 to 29%, mentioned in the study. According to the estimates of “Support”, interest rates on loans gradually declining, aided by expectations for a reduction in the key rate of the Central Bank and excess liquidity. And the Central Bank in its June survey of Bank lending conditions linked the easing of credit conditions for small and medium business with increasing competition among banks. Interest rates on loans to entrepreneurs in the first quarter of 2016 have reduced 35% of the surveyed Central Bank of banks, and increased only 2%. And the stakes more intense decrease in short-term loans.

To reduce rates for small businesses banks, in particular, allows “the Program is 6.5”, earned at the end of 2015. Under this program, banks issue loans to medium-sized business at a rate of 10% per annum small business rate of 11%, receiving refinancing from the Central Bank at a rate of 6.5% under the guarantee of the state Corporation SMEs. For example, in VTB Bank rate on loans to small businesses now stands at about 14.3% per annum, for the borrower with a strong financial position and liquidity to ensure it can be reduced to 13.1%, and companies that implement investment projects in priority sectors of the economy (industry, construction, agriculture, transport, etc.), you can get the loan at a preferential rate of 11%, says the head of the Directorate of small business of VTB Maxim Lukyanovich.

However, the small business loans are still very expensive. According to the latest statistics of the Central Bank on June 1, banks have provided entrepreneurs with loans of up to one year on average by 16,22% — up from 16.47% in the previous month and nearly 16.6% in the beginning of the year. While long-term loans (maturity over a year) for the first time since the end of 2014 began to cost the businessmen more than the short-term. The weighted average interest rate on such loans in may jumped by 0.5 percentage points, to 16.42%, according to data of the Central Bank. The reason is to equalize the cost of funding for banks: the funding of up to one year was expensive, explains Director of product development for small and medium business of the Bank Anna Salmanov.

In July, banks continued to reduce interest rates on loans to small businesses, bankers say. So, b & n Bank has reduced interest rates on loans to SMEs 1.1–3.6 percentage points, said Amirov, and VTB24 — 0.5–2 percentage points, said the head of sales Department customer service small business VTB24 Elena Kolesnikova. The most likely scenario now is a gradual reduction in interest rates as inflation and inflationary expectations and the reduction of the key rate of the Central Bank, says Dmitry Golovanov from SME Bank.

Business sees no progress

“Systemic changes” in favor of business is not visible, the President of the network of dry cleaners “Diana”, a member of the Moscow branch of “Support of Russia” Dmitry Nesvetov. “How were the stakes impossibly high and left,” he laments. According to him, to draw the loan less 20% now very difficult, and to find small and medium businesses, where the return on investment above 20%, even more complicated. Small growth of the loan portfolio can be linked to the fact that entrepreneurs have no choice: we must modernize the equipment, replenish working capital, so they raise loans at the current rates. “But it’s a dead end for business, so it is impossible to develop,” — says the businessman.

The businesswoman Louise yepremyan, who heads the company “Rado-s-Fashion” (manufacturing of women’s clothing), said that the words of the authorities, the desire to develop small business lending and support at odds with reality. In fact, the real sector and small businesses the so-called affordable money and do not reach, the volume of lending increased by a total stagnation in 2015 — that is about some improvements in the credit climate is too early, she said. At the time, her company took loans of 11.9 to 24.5%. “Over the past four years we have paid a total of RUB 115 mln loan money with interest. In a crisis most of our customers have changed payment schedules, and we had to enter into negotiations with Sberbank on the restructuring of the remaining part of the debt,” she says. The talks lasted more than a year, and until the parties came to a compromise.

The owner of the Moscow printing house “kortek” Vyacheslav Trushin says that at the end of 2015, acquired printing equipment leasing in the amount of RUB 2 million, making the printing press reduced prices, which increased the flow of customers even during the summer “drought” (printing is not the season). This allows you to pay the lease without delay. “No fear of new loans we do not and will not: purchase of equipment is balanced and deliberate step. We took the equipment lease at a time when many print shops closed, and do well with obligations. A new collapse of the economy, even if it happens, I am not afraid: in our case there is always a step to retreat — leasing allows you to return the equipment if the company will become insolvent,” says the entrepreneur.