The Moscow Government has launched a pilot project to provide support to businesses in the form of a suretyship for factoring deals that will be issued by the Loan Assistance Fund for Moscow-Based Small Businesses.
Natalya Sergunina, Deputy Mayor for Economic Policy and Land and Property Relations, has underscored that such factoring arrangements will allow suppliers to feel more secure and will also attract more small and mid-sized businesses to the market.
“The city provides tangible support to Moscow-based entrepreneurs in the form of guarantees,” Sergunina said. “Moscow accounts for about a third of all funds allocated to cover guarantees issued to businesses across the country. We have implemented a broad range of programmes that encourage businesses to develop, such as soft loans, subsidies to compensate for interest on loans, tax benefits and other benefits. The new measure will make financial instruments such as factoring more available to financial market participants. Owing to this fact, many entrepreneurs will be able to boost the effectiveness of their business models.”
Factoring, or an agreement for cession of a right of claim, is an arrangement under which the supplier immediately receives payment for the goods from a bank or a factoring company upon his submitting documents certifying that shipment of goods to the buyer has been carried out. Buyers then repay the debt owed to the bank on their own at some future date.
Today, small businesses can only use factoring arrangements under contracts to supply goods to major buyers-cum-debtors. A suretyship from the fund will help small suppliers to better manage their indebtedness and their working capital when dealing with major and even small debtors and will give them more advantageous terms of payment. As for banks, or factoring companies, a suretyship from the fund provides them with a new instrument to better manage small debtors and eliminate risks associated with them.
The Suretyship under Factoring Arrangements programme is a pilot project so far, however, entrepreneurs can send their bids to the fund’s e-mail address: firstname.lastname@example.org or file them with services centres for businesses.
The Loan Assistance Fund for Moscow-Based Small Businesses (the Moscow Guarantee Fund) was established by the Moscow Government in 2006. Since the launch of the government guarantees programme, Moscow-based small businesses have received over 125 billion roubles in loans and guarantees.