Wed. Nov 13th, 2019

Where To Get Money For Business

4 min read

So, your business needs additional funds for development. Where can I get the money? The first thing that comes to mind is a bank loan. However, loans are becoming increasingly difficult to obtain and entrepreneurs have to look for alternative ways of financing.

There are actually a lot of opportunities to find money – in addition to bank lending, there are various funds that work both at the federal and regional levels. However, not all entrepreneurs are aware of them, or simply do not know how to approach them.

Loan for business

First of all, let’s find out why there are difficulties with bank crediting. The idea of taking a loan from a bank looks perfect at first glance.

As a rule, banks offer low interest rates, transparent conditions and a clear term for processing the loan, but at the end of this period it turns out that you have already taken to the banks a few “trailers” of documents, and you do not have a loan. Indeed, getting a loan is becoming more and more difficult now.

Why did banks become reluctant to lend

In just 10 years, the number of banks has more than halved, and since the beginning of 2016, the Central Bank has revoked the licenses of 85 organizations and, apparently, the “cleaning” will continue. The requirements for banks are very strict.

The main reason for the revocation of the license is the failure to comply with the reservation conditions. The fact is that any loan issued by the bank requires reservation of funds. The more reliable the borrower is, the less the reservation factor is, i.e. the lower the load on the bank. Therefore, all borrowers are thoroughly checked before the bank decides to grant a loan.

When you are denied a loan

If you think that with the support of a familiar bank manager or credit inspector, you will get a positive decision faster and easier, you are mistaken. The decision is made by the Risk Management Department and the last word is always with them. And they are very attentive to your reliability as a borrower. Personal connections here will not help. The bank will not accept your reporting if

  • it is not clear from the financial statements how the management accounts turned out;
  • The financial statements show inflated assets/liabilities, discrepancies and goods in stock;
  • Tax reporting data is very different from the income that you declare in the management reporting;
  • there are sharp changes in the reporting, for example, the lender is suddenly written off as income, and the goods as expenses. Such reporting gets the status of “unreliable”;
  • You have a bad credit history. And in the BKI (Credit History Bureau) you can see all the loans that you have ever taken. Wherever you get them, it doesn’t matter as an individual or as an organization. Not only are the founders of the organization checked, but their relatives, directors and financial directors are checked. A delay of even 1-3 days may deprive you of your credit.

After receiving the loan, the “walk in agony” does not end. The bank’s internal control sets a lot of requirements to monitor the financial condition of the borrower.

Therefore, it is very, very difficult to get money in banks or bank guarantees now.

Alternative financing mechanisms

The state offers alternative options for business support and creates various investment funds, where you can also get the money you need for business. I will tell you more about some of them.

Funds in the Sverdlovsk region

Sverdlovsk Oblast Industrial Technological Development Fund

The governor of our region signed a decree on the establishment of this fund on 15.11.2016. The fund will be co-financed by 70% with the federal budget.

For 2016, the Sverdlovsk Region’s budget provides for 165 million rubles, which means that 550 million rubles may be issued. Plus, according to the information from the Ministry of Industry, the unused funds pledged this year will be transferred next year – 100 million rubles in the budget of the Sverdlovsk Region will turn into 333 million rubles of financing.

Single-industry towns development fund

Contributes to the development of monocities’ infrastructure. The fund’s budget is 29.1 billion rubles. In the Sverdlovsk Region, these are Krasnoturyinsk, Volchansk, Karpinsk, Severouralsk, Kamensk-Uralsky, and Pervouralsk.

Basic conditions for financing projects:

  • The form of financing is participation in the authorized capital/loan;
  • Financing share – 40% of the total project cost;
  • The amount of the Fund’s resources is more than 100 million rubles, but not more than 1 billion rubles;
  • The annual interest rate is 5%;
  • The maximum term of financing is 8 years;

Sverdlovsk Oblast Entrepreneurship Support Fund

The Fund was established by the Government of the JI as a measure to support small business. Support tools that may be of interest to medium businesses:

Microloans

Loans to organizations and individual entrepreneurs for up to 3 years. Amount – up to 3 million rubles. But the rate is only 10%. Entrepreneurial loans are issued for target needs related to the purchase of equipment and materials, to replenish working capital.

Sureties on Bank Loans and Guarantees

The amount of the guarantee is up to 70 million rubles (the amount of the guarantee was increased in 2015, before that it was 10 million rubles), but not more than 50% of the principal amount of the loan.

The rate for the use of the guarantee: from 1% to 2%. In total, the Fund issued guarantees of RUB 515 million for the six months of 2016.

Entrepreneurial loans for Customers Fundamentals Capital

Joint project of the Fundamentals of Capital and MFI – financing of the Clients of the outsourcing center. Providing loans to entrepreneurs to replenish working capital for up to 1 year, the amount from 100 tr to 15 million, the rate up to 30%.

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