Entrepreneurs receive over one billion rouble loans with state guarantees

Entrepreneurs receive over one billion rouble loans with state guarantees
In most cases, guarantees are sought by business people involved in priority industries in Moscow.

Since the beginning of the year, Moscow guarantee fund has issued surety to entrepreneurs for over half a billion roubles. This has allowed business people to take out over one billion roubles in loans and guarantees. Compared to the previous year, government guarantees have increased 30 percent.

“In the second half of 2016 and particularly towards the end of the year, the lending market for small and medium-sized businesses has intensified. The top 30 banks increased their lending by 18 percent. This trend continued in 2017 and had a positive effect on the number of applications submitted to the fund. We believe this is an indicator of a reviving economy and of a growing interest in bank funding by borrowers,” commented Anton Kuprinov, Executive Director of the Moscow Fund for the Support of Small Business Lending.  

Between January and February, some 42 small companies, 30 microbusinesses and three medium-sized businesses received state guarantees in Moscow. The largest guarantees were granted to companies taking out loans to strengthen their assets. Twenty-six percent of sureties were provided for participation in government procurement. Some 32 percent of applicants were from priority industries for Moscow (manufacturing, innovation, construction, healthcare). Almost half of the guarantees or 47 percent were granted for a period of one to two years while 9 percent were provided for more than two years. 

“This year, the fund issues guarantees at an annual interest rate of 0.75 percent. Earlier, this discount rate was available to only certain categories of borrowers while now all small and medium-sized businesses can apply for it. The fund decided to cut the rate last December to reduce the total cost of borrowed funds for some companies,” Anton Kuprinov noted.  

He added that last year the fund issued guarantees for 3.6 billion roubles, which helped small businesses to take out 7.4 billion roubles in loans. Eight percent of the guarantees were issued for investment purposes and 40 percent went to companies in manufacturing, construction, innovation, healthcare, housing and utilities, social services and transportation. One in every four borrowers was involved in government procurement.

Benefits for entrepreneurs

The fund issues guarantees to businesses for loans and bank guarantees in amounts of up to 70 percent of the required security and up to 100 million roubles with a 0.75 percent annual interest rate.  

How to apply for a guarantee

The fund cooperates with 60 bank partners, including both large banks with state participation and private commercial banks. For more details click here.

How the fund works

An entrepreneur applies to any of the fund’s bank partners and submits an application for a loan or a bank guarantee. If the bank approves the loan under a guarantee the applicant must submit the same supporting documents to the fund that will then make a decision within three business days. The parties will sign a trilateral surety agreement and the borrower will receive the money.

The most common reason banks reject business loan applications is because of insufficient collateral. The Fund for Support of Small Business Lending was established to solve this problem. Since its establishment, the fund has issued some 9,000 guarantees for 44 billion roubles, which has allowed Moscow entrepreneurs to take out loans and guarantees worth over 90 billion roubles.