Banks are increasingly financing small and medium-sized businesses through leasing

Leasing is taking an increasingly important place in the financing of small and medium-sized businesses. Over the past year, its share reached 14%, “taking away” almost 5 percentage points. from traditional bank lending, and next year the trend is likely to strengthen. For lenders, leasing contracts are an opportunity to work with lower risks and less regulatory burden. For SMEs, leasing provides access to funding under conditions of strict verification of borrowers and provides tax benefits. However, leasing cannot solve all business problems, and its tools are not suitable for all industries.

At the end of this year, the volume of debt financing for small and medium-sized businesses (SMEs) will amount to 19.62 trillion rubles, according to Frank RG’s assessment presented in the study “Lending to Small Businesses in Russia 2023”. This result will exceed the 2022 figure by 39%.

The share of bank funding will remain leading, but will decrease from 80.7% to 76%. At the same time, the share of leasing increased proportionally – from 10.1% to 14.6%.

However, such redistribution often occurs within banking groups. Leasing companies are not yet regulated by the Bank of Russia, so for banking groups with their own leasing company this remains a convenient product from the point of view of the need to comply with various regulatory requirements, including within the framework of risk management, points out the director for bank ratings of the Expert agency RA” Yulia Yakupova. So for banking groups, leasing is an opportunity to increase quasi-lending outside the zone of regulatory pressure, admits Yuri Kolesnikov, Chairman of the Board of Directors of SME-Leasing.

As a result, customers receive a more comfortable product. “A company can draw up a leasing agreement in a fairly short period of time and with a minimum of documents,” Dmitry Novochenko, project leader at Frank RG, explains the trend. “The leasing business can offer tax preferences to its clients, and most importantly, higher chances of approval,” adds Suren Asaturov, Deputy Director of the ACRA Financial Institutions Ratings Group. In particular, clients have the opportunity to return up to 40% of the contract value through tax preferences for income tax and VAT, notes General Director of VTB Leasing Anton Musatov. So next year the trend towards increasing the share of leasing in SME financing will continue, Mr. Asaturov expects.

However, experts note that SME lending and SME leasing have different client segments.

“Leasing is traditionally popular with companies involved in cargo transportation and logistics, passenger transportation, and construction business. Almost 50% of credit clients come from wholesale and retail trade enterprises,” explains Yulia Bokova, head of the financial department of Alfa-Leasing Group of Companies.

Leasing is not able to cover a wide range of customer needs, for example, with the need for working capital, admits Dmitry Novochenko. Leasing for SMEs will continue to grow, but it is not worth waiting for a situation where its share will exceed bank lending in the structure of SME financing in the near future, says Yulia Yakupova. Loans remain a more traditional and understandable tool for business. In addition, various lending programs with state support have a significant impact on the segment, she points out.

Factoring can also occupy its niche in the SME financing market (according to Frank RG, its share is about 3% in 2022–2023), where short lending terms lead to more lenient requirements for clients. But the popular practice of issuing loans to individuals for business purposes may cause concern to the Central Bank, and it is possible that the regulator will resort to measures to curb it, Suren Asaturov believes. Bonds can also be an alternative instrument for funding SMEs, recalls Dmitry Orekhov, managing director of the NKR rating agency.

Polina Trifonova