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  • How a small business can get a loan, but not from a bank

    "Over the past few years, more than 350 banks have left the market and entrepreneurs are forced to look for other legitimate sources of financing,” - Yevgeny Shulepov, the member of the State Duma Financial Market Committee, said.


    "A new bill regulates the fuzzy and unclear status of retail financing – crowdfunding - and combines different models of alternative investments” - explains the representative of crowdfunding platform.


    Definition of crowdfunding: When investors give money for a project and the business entity rewards them with products. Investors pre-order a product with prepayment and deferred delivery.

    Crowdlending refers to loans provided by a pool of retail investors.


    Interviewed by Vedomosti, entrepreneurs consider "people's money" a useful tool, but with some tricky moments.


    Two models


    "For small businesses, banks often refuse loans or require significant collateral exceeding the amount of a loan whereas gaining loans for small and medium-sized businesses takes about a day on crowdfunding platforms with lower percentage of failures,” - Maria Dokshina, the executive director of crowdfunding platform, says.


    "A small enterprise undergoes scoring, and as a result, most often receives a loan,” - Ivan Bely, the co-founder of the Fundoo crowdfunding platform, says.


    An average of 7-8 people respond for one application with an average check of 100,000 rubles. An investor concludes a conventional loan agreement with an electronic signature with a business owner. Companies usually collect the required amount within six days. According to Bely, the average rate is 25%, the maximum rate is 37%.


    "In 2017, Penenza crowdfunding platform issued loans on the sum of 9 billion rubles. Of these, 4 billion were for small and medium businesses, which were denied by a bank,” - Dmitry Pangin, the CEO, comments.


    "The lending rate is 3.5% per year, the average loan amount is 1 million rubles, but Penenza only works with tender loans, that is, each application of a borrower for lending is tied to a specific state procurement,” - Pangin notes.


    Hidden Costs


    Beginner entrepreneurs who do not get financial support from a bank, prefer crowdfunding, because it is a cheaper alternative. But entrepreneurs say that it is difficult to raise enough money for development.


    Oleg Samoilov, the founder of "Open School of Photography" from Kazan, believes that "people's loans" are too expensive - more expensive than loans in a bank.


    However, the school of photography does not bring sustainable profit, and there is nothing to pay credit back. Therefore, Samoilov is trying to raise money for the development of an online learning platform through, where investors are offered a free course at a photography school in exchange. In total, he needs 5 million rubles. But for half a year, only 130,000 rubles were collected.


    However, small businesses bear the application costs for crowdfunding.


    Entrepreneurs from Khabarovsk, Pavel Osipov and Daria Buseva, decided to raise money through Boomstarter for the production of the city backpack Neovima in 2015. They announced that they were looking for 130,000 rubles. Sponsors were offered a reward - a discount of 15-33% for the purchase of a bag or backpack and free shipping. For 40 days, 150 sponsors have transferred to Osipova and Buseva 525 000 rubles. Businessmen received about 400 000 rubles "on hands”, having paid 13% of personal income tax and on 5% for the commission for the services of a crowdfunding platform and cash transaction fees. In 2017, says Buseva, they re-posted their project on Boomstarter and collected 1.2 million rubles. The money was invested to create a new collection of backpacks. According to Buseva, the company needed to re-raise funds for Boomstarter not to further develop its business, but mostly to remind consumers about itself, to test the new collection and to declare the company not as a start-up, but as a strong business.


    Buseva says that to really develop the business, Neovima needs 5-10 million rubles, and such money can only be taken in a bank and is impossible to collect them on crowdfunding platform.


    Testing the idea


    Nikolai Yudin, the founder of Unawheel, the developer of electrical outfits for wheelchairs that allow patients to move independently, says that placement of the project on crowdfunding platforms is primarily PR, advertising and testing of product prototypes and does not solve the problem of financing.


    From February to March 2017, he collected 1 million rubles on platform. From November to December 2017, he posted his project on Boomstarter but did not receive anything as he collected too little sum for 40 days and lost it right there.


    Yudin assesses both platforms exclusively as a way to declare himself and test the product.


    He actually spent about 3 million rubles to develop the console. He claims that he took money from his savings.


    However, a full-scale development of production requires 10 million rubles. The businessman took an interest-free loan of 500,000 rubles in the fund of social projects "Our future", which finances only social projects. He intends to continue crediting in this fund and says that he first took a small sum to create a positive credit history. And then he is going to borrow more money from the fund - as much as it is needed to develop production.


    Information source: "Как малому бизнесу получить ссуду, но не в банке"
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