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19 Mar, 2010 14:19

Small business owners get chance at success

A Bank gives grants and cheap loans to promote small firms. A managerial consultant just a year ago, Michael Gerasimov now owns a small café and bakery in central Moscow.

He started his business eight months ago at a time when others were closing or at least reducing their operations. Michael says it was a good time to start.

“The crisis can offer new possibilities for small business. For example rental rates decreased – the year before we could barely find a building for our business as we couldn’t compete with more cost-efficient big chains.”

For small business, funding is like air to breathe; without easy access to loans, they cannot be competitive or develop successfully.

But extracting a loan from a bank requires a special talent.

Michael was lucky; he was given money in a contest financed by Promsvyazbank. The bank says supporting SMEs is part of its strategy – other state banks say the same thing.

“We see great growth potential in small and medium business as now they represent a very small part of Russia’s GDP – while in some countries their share is 50%,” says Elena Makhota, Vice President of Promsvyazbank.

Actually, in the United States, small firms employ more than half of all staff in the private sector, generate two-thirds of all new jobs and contribute more than half of total national income once you exclude the farm sector.

Currently only 20% of working Russians are employed by small and mid-size firms though the state body charged with supporting them wants to triple this over the next decade.

How many people will take their chances founding a new business remains to be seen.
Michael advises everyone who wants to have a go to think twice and have a back-up plan.

“They say if you want to take up all your time get into small business, which is especially true for public catering – it’s purchasing every day, producing every day, which should be supervised – all this takes a lot of resources.”

Michael says he can do without state support – what would be useful is for the state to keep out of his way.

“Small business is really the least protected. At any moment we can expect some inspectors to fine us or make some demand that we can’t meet in time – not everything depends on us here.”

He will spend his windfall from the bank on new branded packaging, a web-site to sell online, and a PR campaign. That’s if the money goes far enough because the tax man has already claimed 40% of his prize.