«Both small and medium-scale businesses can only find the startup capital they need themselves. If one does not have one’s own capital, there will be no loan from a bank, and all this talk of being able to get a loan to finance a good idea is, to be painfully honest, sheer lunacy. An entrepreneur can only use a bank’s loan offers for managing the scale of his or her working assets. It’s virtually impossible to get a loan for a long-term project as far as Russian banks are concerned; the only exception to this rule is loans that use real estate or land as the loan collateral», Vsevolod Chaschin, General Director of Blagodat Securities Investment Company, said to UrBC.

«One’s wage bill can make up to 30% or 50% of the total project cost; added to these are the operating costs and overheads as well as expenses that involve buying raw materials and component parts. In the meanwhile, it is the proportion of these fixed expenses per one ruble of profit that actually determines the borrowing potential of a business. A large proportion enhances the risk levels, and these risks are bound to grow even greater if a company finds itself in debt», Mr. Chaschin added.

Switching to legal wages is one solution to the problem for small and medium-scale businesses. Otherwise, they are sure to continually keep looking for new finances and end up getting involved with an unscrupulous money-lender. Legal wages are also good for workers, who will be getting more in the form of pension savings, for suppliers, who will be more loyal to the company, for bankers, who will like the more transparent flow of finances and predictable credit record, for state authorities and, in the long run, for the shareholders who wish they could invest in more than just oil and gas businesses», he observed.