How FinTech Businesses Are Helping Entrepreneurs in the Age of Coronavirus

Due to the spread of the COVID-19 omicron strain in Russia, the turnover of SMEs may be under threat. Dmitry Shepelev, head of unsecured lending at SimpleFinance, a leading Russian fintech lender for small and medium-sized businesses, spoke about how entrepreneurs can support companies during difficult times.

For the third year now, each new pandemic wave has hit the Russian economy. In 2021, with inflation accelerating to 8.4%, the Central Bank raised the key rate from 4.25% to the current 8.5% per annum. Even though during the period of covid restrictions, the Government has repeatedly introduced several anti-crisis support measures, against the backdrop of inflationary “turbulence”, business loans and other commercial instruments to support Russian entrepreneurship have risen in price.

If companies invested in expanding production or diversifying in pre-pandemic times, then, most likely, they have almost no free funds, considering the costs that arose during the pandemic and after. Therefore, to not withdraw money from circulation, entrepreneurs often use loans. Additional finance can help upgrade equipment, increase the range or volume of purchased products, cover costs, or form an anti-crisis portfolio.

According to the expert, this is an unsecured product with a credit limit on the company’s current account from 100,000 to 15 million rubles, depending on the borrower’s turnover. Registration and issuance take place online in just two clicks. The money is credited to the account of the borrowing company within 24 hours from the moment of application without complicated bureaucratic procedures. Thanks to deep integration with a partner bank.

Overdraft Product Manager Dmitry Shepelev explained that after the approval and opening of the credit limit, the entrepreneur himself decides whether he wants to use credit funds and to what extent.

Since the post-COVID 2020 period, banks have been reluctant to issue non-purpose loans to business people, according to SimpleFinance research, as their use is more difficult to control, and the risk of default is higher than that of a loan for specific needs. This trend provoked a deficit in the lending market in the niche of unsecured general purpose loans, while demand for them remains high, confirmed by the launch of the pilot product Overdraft 1.0.

For six months of testing:

• Open limits for more than 500 million rubles;
• More than 100 companies received the product;
• Conversion from incoming calls to approved applications – more than 70%;
• Conversion from approved applications to loans taken – more than 70%;
• End-to-end conversion from the incoming application to the issuance from 20 to 30% is significantly higher than the average market indicators of loan products for SMEs.

At the same time, according to Dmitry Shepelev, there was no task of aggressive portfolio growth since the goal was to test the product, its parameters, demand and metrics. SimpleFinance regularly monitored the turnover of funds on accounts. For conscientious borrowers, the limit amount could be increased, and for “problem” borrowers, it was possible to reduce or suspend it. Thanks to a well-developed risk map, the default rate, that is, non-repayment of loans, of the Overdraft 1.0 product amounted to only 0.2%.

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