Anti-Russian sanctions forced the banking sector to restructure traditional financing methods, especially in terms of foreign trade transactions. Boris Sobolev, Director of PSB Factoring Operations Department, states that the impact of the sanctions on the factoring market is significant, however, negative scenarios have now been overcome and the factoring market is growing again. “Factoring was quickly rebuilt, new effective mechanisms were found,” says Sobolev.
According to the Association of Factoring Companies (AFC), the portfolio of the Russian factoring market at the end of 2022 amounted to 1.434 trillion rubles, which is 5% lower than a year ago. The decline is due to the impact of market restructuring and growth started as early as the fourth quarter.
However, the total portfolio grew 20% in Q4 for October-December, according to AFC. This is due not only to seasonality – trade turnover always grows before the New Year holidays, but also due to the fact that factors adapt to new realities.
Experts discussed support for small businesses in the new conditions at the PSB forum
According to Sobolev, PSB quickly adapted to the situation thanks to the high expertise of its employees and high-quality risk management. In addition, the bank has invested in the digitization of factoring services and integration with partners’ electronic channels, thus shortening the maturities of the credit cycle. As a result, while PSB’s factoring portfolio grew by 7% in 2022, above market indicators, its client base with factoring agreements grew at a similar pace. The main sectors of PSB factoring are mechanical engineering, energy, infrastructure and trade in the IT sector.
One of the most important transactions of this year is related to the energy complex. PSB and S-Plus (a subsidiary of Rosenergoatom Concern JSC, the energy division of Rosatom State Corporation) signed contracts under which until 2025 the bank will finance the program to update and modernize the metering devices for the energy complex in the Central Federal District. .
For the energy complex, the main advantage of the transaction is that when concluding an energy service contract, the costs of energy savings are not initially paid by the customer, but are compensated by the savings obtained as a result of the execution of the contract. The contractor under the energy service contract takes measures to improve energy efficiency and energy savings at the customer’s facilities at his own expense. The client pays under the contract at the expense of funds saved from energy services.
support of government
In 2022, companies had the opportunity to trade with Digital Financial Assets (DFA) – these are digital analogues of securities (stocks, bonds, loans and bonds) contained in the information system. The use of DFA simplifies document flow, allowing you to get finance faster. AFC recognizes that DFAs are the focus of attention in the factoring community and it will likely be factoring that will make the most of new opportunities to structure products using DFA.
PSB held a conference on the development of the economy in new geopolitical realities
Last April, the Central Bank of Russia, as part of its support for entrepreneurs during the sanctions era, made changes to its revolving loan program for SMEs, which allows banks to extend loans to factoring companies to finance small and medium enterprises. (SMEs) at discounted rates – up to 15% for small businesses and up to 13.5% for average.
Another support measure was introduced in the capital – in April 2022, the Moscow government launched a program to subsidize the interest rate under factoring agreements for lending to small and medium enterprises. PSB was one of the participants in this program.
The inclusion of factoring in the Moscow Entrepreneurship Support Program became unprecedented and expanded the opportunities for businesses to obtain preferential financing in difficult economic conditions. Capital entrepreneurs working in various industries and tax resident of Moscow can receive a preferential rate at a rate of not more than 1/2 of the key rate of the Bank of Russia, which is increased by 6% annually for 12 months under factoring agreements.
In addition, the factors received significant support from the federal government – in September 2022, it adjusted the co-financing program for the overhaul of apartment buildings at the expense of the Housing and Utilities Fund (as part of Resolution 18 of January 17 , 2017).
The program allows the factoring contractor to reimburse a portion of the costs of paying the financial intermediary. The Russian government has adjusted the procedure for transferring subsidies by the Housing and Utilities Fund for the energy-efficient overhaul of an apartment building. Legislators envisaged an opportunity to receive financial assistance for the replacement of the elevator under a factoring contract. The client concludes such an agreement with the bank, instructs him to pay for the work of updating the equipment, and in a few years agrees with the bank.
Factoring market on the rise
The 2023 expectations of the factoring market participants are quite optimistic: Almost half of the companies participating in the research of the association believe that this financing market will grow by 25%. One of the reasons for optimism is that there has been a significant increase in financing of small and medium-sized enterprises through factoring. Thus, according to AFC, the number of SMEs using factoring in Russia in 2022 increased by 17% and the volume of their transaction portfolio increased by 22%. And for the current year, market participants expect further growth in this type of financing for SMEs.
According to him, the prospects for development lie in the search for industry solutions, product digitization, the transition to paperless document management and new mechanisms to finance supply chains within the framework of electronic sales channels. “The popularity of factoring in Russia has grown significantly in recent years, but the potential is still far from exhausted – there is room for growth,” concludes PSB’s factoring operations department manager.
PSB was the first on the market to launch a business assistant in VK Messenger
I am Emma Sickels, a highly experienced journalist specializing in news and economy. As an author at News Unrolled, I cover the latest trends in the economic sector and provide readers with valuable insights into its complexities. My work has been featured in various media outlets such as The New York Times, USA Today, Bloomberg Businessweek and many more.