Russia (bbabo.net), - Lending to legal entities in the North Caucasus in the first nine months of 2021 increased by 38.8 percent compared to the same period in 2020. At the same time, the all-Russian indicator was 17.1 percent. Preferential lending programs have helped many businesses stay afloat during the pandemic and build momentum. However, this "medal" has a downside. According to financial market experts, a strong dependence on borrowed money can seriously hit companies in the future.

“The positive dynamics of obtaining corporate loans indicates the restoration of economic activity in the region,” said Svetlana Batsyna, deputy head of the Bank of Russia branch in Dagestan. - Lending to enterprises in the construction industry, as well as institutions that carry out operations with real estate and rent, has noticeably increased in the face of high demand for housing in the republic.

In the nine months of 2021, legal entities in Dagestan borrowed more than five billion rubles, which is 21.5 percent more than in the same months of last year. In North Ossetia, even more - 8.6 billion, which is almost twice the figure of the previous year. Of these, about six billion were received by small and medium-sized enterprises (SMEs).

- Loans for 2.6 billion were provided to large businesses, which is almost five times higher than in the first nine months of 2020. Growth in this segment was facilitated by lending at a preferential rate to agricultural producers, - explained Irina Dziova, head of the North Ossetia branch of the Central Bank of the Russian Federation.

The audit and consulting network FinExpertiza calculated that in five republics of the North Caucasus, large and medium-sized enterprises are in a difficult financial situation and experience a shortage of their own funds: Ingushetia (-52 percent), Dagestan (-34.1 percent), North Ossetia (-27 percent). 9 percent), Kabardino-Balkaria (-9.6 percent) and Chechnya (-2.4 percent). This means that the obligations of local businesses at a certain point can only be covered by external financing, that is, new loans and funds raised from investors or the state. In Ingushetia, the mining industry found itself in an unstable financial situation. In addition, in all five republics, a shortage of resources is characteristic of the housing and communal services sector.

According to FinExpertiza, in Russian practice, the share of own funds in the total value of assets of 50 percent or more is considered normal - this allows the business to cover all obligations from its own resources.

The executive director of the North Ossetian branch of the all-Russian public organization of small and medium-sized businesses "Support of Russia" Eteri Khokhoeva, in an interview with a correspondent, emphasized:

- The most affected part of the business during the pandemic is still small business. During the coronavirus restrictions, many businesses practically did not work. The pandemic has had a particularly negative impact on the service sector and catering - cafes, restaurants, hairdressers, salons. Where do the owners of such establishments get the funds to restore turnover? From the money that clients pay them, they pay for rent and utilities, pay taxes, loans and interest on them, buy consumables, upgrade equipment, and support employees. During the lockdown, clients stopped coming to them, the external source of funds dried up, but obligations remained.

According to her, at that moment entrepreneurs were offered various support options. One of them - preferential loans for the resumption of activities at two percent - such a rate was subsidized by the state. The main condition was to keep 90 percent of the staff in the state during the year. If the conditions were met, then the state itself extinguished the loan, if the company retained 80 percent of its employees, then half of the loan was written off. But if the entrepreneur failed to do so, he was required to repay the entire loan at the market rate within three months.- Indeed, the economy of the North Caucasus is characterized by a significant share of small and medium-sized businesses, which were given the opportunity to receive preferential loans at a very low interest rate, but with the condition that the enterprise would be able to keep jobs. Large banks, even after the completion of support programs, met the needs of business. But there were also those who, after the expiration of the grace period, made demands on companies that allegedly did not retain the staff. For example, someone in the organization went on maternity leave, somewhere an employee was fired, but another was taken in his place. And this became a pretext for declaring that the enterprise did not fulfill the conditions and must return all the funds received, at the same time with other percentages, greater than those stipulated in the government decree, - Azamat Tlisov, director of the North Caucasus Institute - a branch of the RANEPA, told the correspondent. - Many SMEs have experienced this. They don't have the resources to fight in the courts. As a result, they were among those who increased their debt burden.

However, according to experts, not in all cases a high proportion of borrowed funds can have a critical impact on the company. For example, if the margin of the product being produced is high or the turnover of the enterprise is significant and far exceeds the amount of the loan, then the loan will not become so burdensome.

- The balance between attracted and own funds is always regulated by external conditions, including inflation, to which the Central Bank reacts by determining the key rate, - Azamat Tlisov believes. - And as for large enterprises, some of them, having got into production modernization programs, are simply forced to attract additional funds. Many are engaged in import substitution, they need to increase their capacities in order to respond to market demands. It is difficult to increase investments without lending. In general, the share of borrowed funds in assets should be determined based on the specifics of the business, its seasonality (for example, agribusiness enterprises need large amounts specifically for sowing), and the speed of turnover of funds.

Svetlana Gladkina, director of the small business sales department of the South-Western Bank of Sberbank, told a correspondent that in total in 2020-2021, the financial institution provided more than 35 billion rubles to small businesses in the North Caucasus. Here, the growth trend in the issuance of loans was also associated with a large number of concessional government lending programs. But there is another reason.

- The average age of our client in a small business is decreasing. Now young people are not afraid to look for investors for their startups and take loans for development. Availability of new digital services for businessmen also played a big role, - added Gladkina.

According to her, when determining the loan amount, the current debt load of the client is taken into account, and an assessment of its financial activity and solvency is carried out. If a businessman plans to implement a large and complex structured project, then, of course, special attention will be paid to the property security of the loan.

According to the South-Western Bank of Sberbank, in the past two years, small businesses in the North Caucasus Federal District most often applied for revolving purposes and for non-purpose lending. The share of investment lending in these regions accounts for about 20 percent of the total volume of loans. In the regions of the North Caucasus, loans are most often taken by entrepreneurs working in retail and wholesale trade, agriculture, transport and logistics.

According to Azamat Tlisov, there are a number of tools that allow the company, together with creditors, to get out of a difficult financial situation. Of course, the participation of regional authorities is important in order to keep the company working.

- In general, ideally, there should be no more than 50 percent of borrowed funds in assets, so that in case of problems, the company has money to settle with creditors. At the same time, 50 percent is already an alarming figure. Given fixed costs, it is recommended that no more than 25 percent of income be spent on servicing a loan. But, as practice shows, unfortunately, enterprises spend over 50, and sometimes 70 percent of their income on this, - Tlisov stated.

In turn, Eteri Khokhoeva explained that companies have other opportunities to improve their financial situation:

- There are federal and regional programs that are aimed at supporting certain business areas in a particular subject. There are investment programs, where the state also acts as an investor. There are programs for preferential provision of material and technical means and land plots. Microfinancing and guarantee funds operate in almost all regions. For social business, there are centers for innovation in the social sphere, where they provide financial support. There are also private funds that provide soft loans. So you need to look, there are a lot of options.

Comment

Yaroslav Kabakov, Strategy Director, Finam Investment Company:- The stability of the company is largely determined not by the level of debt, but by the growth rate of revenue and profit. There are a huge number of ultra-heavy-leveraged businesses that show revenue growth of 30 to 70 percent per year without a profit, and lenders and investors have no questions about the sustainability of such a business. The main problem of entrepreneurs is the lack of solvent demand, due to which it is possible to pay off debts in the future.

Meanwhile

According to FinExpertiza, the most indebted areas in the country are the hotel business and catering (at the end of September 2021, only 5.7 percent of assets were formed at the expense of own funds), the construction industry (23.1), the manufacturing industry (37.4 ), financial and insurance activities (42.8), as well as real estate (45.8).

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