Due to the growth of the key rate, an interesting trend has appeared in the Russian credit market
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Small businesses urgently need money, but interest rates are high
The Central Bank’s confident policy of increasing the key rate predictably caused an increase in average market lending rates. As a result, despite the high demand for borrowed funds, many company owners and individual entrepreneurs took a break from relations with bankers. MK found out which loans and at what rates are most in demand today.
The other day, the Bank of Russia published its next bulletin “Lending to small and medium-sized businesses.” It says that in September 2023, the volume of loans provided to SMEs increased by 2.6% compared to August – to RUB 1.6 trillion. The average loan size was RUB 5.7 million. Every third loan (32.5%) was issued to representatives of wholesale and retail trade. According to analysts, many entrepreneurs are in dire need of borrowed money in order to try to occupy niches vacated after Western companies left the Russian Federation.
True, cold winds blew in the SME lending market in October. The Central Bank’s decision on October 27 to fight inflation to raise the key rate by 2 percentage points, to 15%, caused a new wave of rising loan prices. Following the regulator, most players raised rates for legal entities by 1.5–2 points. As Ivan Lonkin, head of the client relations department at SDM-Bank, told MK, a trend has emerged in the lending market – increasingly, the cost of a new loan is calculated for the client “according to the formula”: the Central Bank rate + a certain percentage. Thus, both the client and the bank have the opportunity to predict further changes and respond adequately to them.
Against this background, small and medium-sized companies refused investment loans (more than 20% per annum). It is very difficult to recoup investment projects at such a market rate. According to Lonkin, the business has taken a wait-and-see approach and is trying to make do as much as possible with its own funds or borrowed money borrowed earlier. “However, our practice shows that business develops at any time and at any rate. The main thing is to accept new circumstances, start working in them and at the same time look for how to reduce costs,” the banker noted.
Many entrepreneurs have already done this. It is significant that the level of delinquency in the SME loan portfolio in most banks does not exceed 3–4%.
“Despite the increase in the key rate and, as a consequence, the effective rate for the client, the overall demand for loans remains at a high level,” said Alexander Okulichev, director of the SME lending support directorate at Bank St. Petersburg. In his opinion, there has been no significant decrease in demand for loans; today loans under government programs are in great demand, allowing to reduce the cost of borrowing. True, preferential conditions under the Ministry of Economic Development “1764” program and preferential funding “PSK” of the Bank of Russia and the SME Corporation are not available to everyone due to restrictions.
By tradition, loans to replenish working capital and overdrafts are popular, added Yaroslav Chereshnev, managing director of the Sovcombank Digital Bank. According to him, average rates on market products start at 17%.
As Ivan Lonkin noted, due to the growth of the key rate, another interesting trend has emerged: in order to avoid taking out expensive loans, companies are asking for more advances from customers under commercial guarantees. The new request has a simple explanation: the cost of a bank guarantee is 2–4% (against a credit rate of 16–18%), and under such a guarantee the customer is more confident in making advances, understanding that his risks to the contractor/supplier are covered. As a result, loans for contract performance began to be replaced by commercial guarantees.
In addition to guarantees, owners of small companies also have a great demand for leasing. Since the beginning of this year, according to Frank RG, the share of leasing in lending to small and medium-sized businesses has reached 14.6%, “taking away” almost 5 percentage points. from traditional bank lending. Banks are willing to promote leasing through their specialized subsidiaries, since leasing contracts have fewer risks and less regulatory burden. Lessees are also happy: the product allows them to receive tax benefits and gives them access to funding under conditions of strict screening of borrowers.
Until the end of this year, Ivan Lonkin does not expect a sharp change in lending rates. According to his forecast, an adjustment of up to 1 percentage point is possible, but it will not have a significant impact on the SME lending market. “The entire business is counting on a reduction in the key rate and an increase in lending activity in the 1st half of 2024,” the banker noted.
At the end of this year, the volume of bank lending will grow to a record level of 14.9 trillion rubles, which is 31% higher than in 2022, Frank RG analysts are confident. As Alexander Okulichev believes, in 2024 state support measures in terms of subsidizing rates may be limited (primarily under the PSK program). However, the programs are still running this year. Therefore, he recommends that potential borrowers from the SME sector find a lender who has free limits for this year under government programs and sign a contract before the New Year holidays. In this case, credit funds at a reduced rate can be used over the next few years, even in the event of a shortage of limits in banks and restrictions on concluding new transactions in the future.
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And I want it, and it injects me
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