Implementation of standard technologies, lending conditions and other forms of efficiency improvement for SME

Date: 2015-10-07; view: 463.

Properly designed technology of SME lending is a key factor in reducing the risks of lending to small and medium-sized businesses. But, at the same time, it is impossible to give clear instructions on the use of certain procedures, as each bank individually choices lending technologies, depending on their lending policy. We can only provide some recommendations based on the experience of other countries, the experience of previous years in Russia and based on the developments of leading experts in the banking sector.

One of the most appropriate tools in supporting small and medium sized business is the provision of guarantees. These guaranties are implemented in the form of certain schemes. Such schemes involve the participation of three parties: the borrower, the lender and the organization - the guarantor. In this case, the lender provides coverage in case a small or medium-sized company - the borrower is unable to repay the loan at his own expense. Guarantees are issued with the retention premium or interest, including risks and various administrative costs. In foreign practice, the risks are generally distributed between the creditor, the bank-lender and organization- guarantor in a ratio of 30% and 70%, respectively, which encourages banks to greater scrutiny of the borrower after lending.

Guaranteeing loans system to small and medium-sized businesses has been used in different countries for many years already. As an example, in Europe there is the European Association of Societies of mutual guarantee. This is an international non-profit association of mutual guarantee societies which include 18 European countries. In many European countries, as well as in Canada, guarantee schemes are used by about 10% of small and medium-sized enterprises. And often, this mechanism is used by organizations that exist in the market for less than 5 years. Despite the significant structural and legal differences of guarantee schemes in different countries, we can distinguish two main types of them:

1. Guarantees are provided by the Companies of mutual guarantee. These societies can be created by the SMEs themselves or chambers of commerce sometimes in partnership with banks. These associations provide a collective guarantee for the loans, which are issued to their members. Members of these organizations are involved in the formation of capital and in the management of the scheme. Such societies are a kind of co-operatives, where members distribute responsibility. They are able to provide a better assessment of the organization and its projects as they are well informed about their activities. Functions of such societies are often not limited to the issue of guarantees, but include negotiating with banks to provide credit, as well as professional services to maintain and support its customers' business. Mutual guarantee schemes are widespread in Italy, France, Germany, Portugal and other countries.

2. In the Russian Federation has been extended second type of guarantee schemes. This is due to the specific characteristics of our country. People in Russia are more inclined to trust government agencies and expect them to help them, than to create a society based on shared responsibility by themselves. That's why the Agency of credit collateral was created in the Leningrad region in 2004. It included 100% participation of the local authorities. This agency provided guarantee for loans and leasing transactions, which partially or completely can't be ensured or guaranteed by the third parties. Due to the fact that many small and medium-sized businesses are experiencing problems in providing collateral for loans for a period longer than one year, the creation of such an agency was a major step in support of SMEs particularly in the Leningrad region.

The agency operates on the principle of payment for their services. In this case, the borrower must cover at least 30% of its liabilities to the bank for a period of up to five years, and the maximum amount of guarantee is 3 mln rubles. The agency and the borrower shall be jointly liable for repayment of the loan to the bank. When applying for a guarantee the borrower must meet the following requirements:

· It must comply with the criteria for SMEs

· It must be registered on the territory of Leningradskaya region and to run business for at least one year

· Financial and economic activity of the borrower doesn't need to meet breakeven at least 3 months that precedes the date of the loan application

· Purposes of the loan must be either industrial projects, or projects to provide services.

Another mechanism to simplify the system of lending for SMEs is the introduction of so-called "credit factories". This mechanism helps to reduce operational costs for consideration of applications, but at the same time it increases the risk of these loans, which, in turn, leads to an increase in interest rates on such loans. If such a mechanism is effective with respect to our country will be clear in a few years, when there will be more or less stable circuit of such lending that will minimize the negative consequences of the introduction of this mechanism.

Another successful form of interaction between banks and small and medium-sized businesses is a mechanism when the bank provides the borrower with additional services such as consulting services, services for accounting and reporting, personnel management and production, and others. This is necessary because many persons, who run their small business, often do not have adequate financial education, and for this reason cannot properly keep track of all processes in the organization.

For people who just want to start their own business, today there are two new forms of cooperation with banks:

1. The first type is franchise lending. The borrower is actually provided with ready-made business and it operates under a certain brand and the terms of the franchise. In this case, the borrower would have to pay part of the initial capital. The loan amount may vary in different limits: 100 000 rubles. up to 3 mln. rubles. As an added bonus a company - franchisor can provide free services for the support and conduct of business in the early stages, often within the first 5 years. Leader in this area is Sberbank. His loan product "Business - Start" includes partnerships with about 50 companies willing to provide your business a franchise. These companies include: SUBWAY, ECOWASH, 220 Volt, Milabel, Velodrayv, Sbarro and others. There is the opportunity to offer your company, if it is not in the list, and Sberbank will consider options for cooperation with it. This mechanism allows you to start a business in the shortest possible time, sometimes even within a month.

2. If person does not want to run his business under an assumed name, then some banks develop standard business plans focused on particular sectors of activity of small and medium-sized businesses. In the SBERBANK today there are 10 of such business plans and in the future their number will only increase.

These two forms of interaction between banks and small and medium-sized businesses have a positive impact on both the borrower and the bank. Bank wins because he develops a reliable scheme of doing business, which minimizes the risks of lending to customers. The borrower also wins because it gets on his hands ready mechanism, which only requires the right mechanism to introduce the product to the market.

Today many banks have approximately the same range of credit products for small and medium-sized businesses, wearing a different name, with slightly different conditions. For example, short-term loans: overdraft, loans for working capital or bank guarantees in SBERBANK such loan products are called "Business Overdraft", "Business Turnover", "Bank guarantees" in ROSBANK- "Universal mortgage loan "," Overdraft to small businesses "," Professional "and" Professional + ". Such line of credit products are consistent to the requirements of small and medium-sized businesses, we can only give some advice to banks that are planning to start or have already launched line of credit products for SMEs. In particular this applies to micro-credit, as they are now most in demand in the market lending to SMEs. It would be desirable to include in this line:

1. Untargeted (3 mln.r.). The need for such a loan can be easily explained. Companies often cannot provide documents that can prove the purpose of the loan because it is connected with a particular area of activity, for example, the production of meat or sausage- bakery products. People who supplies organizations with such products very often can't provide large customer with check for the product.

2. "Start up unsecured loan" (3 mln.r.). This loan product is required due to the fact that entrepreneurs are rarely have enough collateral on hand that can satisfy a bank or this collateral does not meet the requirements of the bank, for example, the documents for the equipment were lost. In this case, the organization or entrepreneur almost loses the ability to get a loan.

3. "Credit under the guarantee of the Fund." Now Russia is actively created various funds that help small and medium-sized enterprises by giving those guarantees. Some banks even cooperate directly with specific funds, and already have the appropriate loan products. An example is ROSBANK, having as part of its line of credit to SMEs product called "Lending to small businesses under the guarantee of the Fund"

Thus, there are various forms to improve the efficiency of interaction between banks and small and medium-sized businesses. Each of these forms has its pros and cons. It is important to understand that the implementation of various technologies must be up to date to the current economic and social conditions. Both banks and borrowers should benefit from cooperation. Although the gradual implementation of standard procedures and credit schemes for small and medium-sized enterprises should remain a priority, banks should not lose their individuality and try to minimize their risks through a combination of standard and individual conditions in reasonable proportions.