Chapter 2 Small and medium sized enterprises – relations with banks
2.1 Main characteristics of small and medium sized enterprises as borrowers
As previously mentioned, it is difficult to overestimate the role of small and medium-sized businesses in any economy. In economically developed countries, SMEs form the basis of the economy and provides a socio - economic and political stability. But for the successful functioning and development of the SME this segment needs a developed market lending. "Credit is a system of economic relations arising in the process of providing money or other means by the lender to the borrower for temporary use on terms of maturity, payment and repayment."
In Russia, lending to small and medium-sized enterprises is very important. For commercial banks lending to this segment is particularly relevant in today's conditions, as it has great potential for development. In addition, it is able to bear the appropriate mix of risk and return. Not so long ago the confidence of banks to the SME segment was very weak, which prompted them to contact the corporate sector for lending. But big companies do not always need borrowing, and some of them prefer to go to the financial market. From the point of view of the constancy of borrowing needs small and medium-sized businesses are clear leaders in comparison with the corporate sector. Paying more attention to the SME segment the commercial banks diversify their portfolio, which allows them to avoid excessive concentration of large volumes of loans in their portfolio.
Although the state is attempting to create favorable conditions for the development of SMEs, there are still many problems that hinder its development. One of the main issues is lack of own funds. The obvious solution is lending, but it is very often inaccessible to small and medium-sized businesses because of a number of problems:
- Lack of required collateral;
- In many cases, the lack of or improper maintenance of financial and operational reporting, which may be associated with low literacy of business owners;
- The need to collect a lot of documents for the loan. This often requires time-consuming, and it is not appropriate to the borrower, if he is interested in obtaining a loan promptly;
 Krolivetskaya L.P. Credit operations of commercial banks in Russia: Proc. Manual / L.P. Krolivetskaya, E.V. Tikhomirov. - SPb .: Izd SPBSUEF, 2007. - P. 5