An individual entrepreneur may qualify for loan payment holidays in two ways.

• As a representative of small or medium-sized business, if their activity is related to industries affected by sanctions (Resolution of the Government of the Russian Federation No. 337 dated March 10, 2022).
• As an individual, if they have taken out a personal loan for an amount of up to RUB 350 thousand.

In the first case, the sole proprietor submits the following documents to the bank:

• an application for a payment deferral (in person, by phone, or in their account on the bank's website);
• a document confirming a decrease in income for the previous month by 30% or more (a certificate from the tax authority).

In the second case, it is also necessary to submit to the bank an application for a payment deferral (in person, by phone, or in their account on the bank's website), however, there is no need to confirm income. It is sufficient to indicate in the application the business activity code in accordance with the OKVED code specified in the Unified State Register of Individual Entrepreneurs, provided that it is included in the list of industries affected by sanctions.

Please note that since 2022, providing documents to arrange loan payment holidays is not an obligation, but a right of the Borrower. The bank may independently request the necessary information from the Federal Tax Service, the Pension Fund of the Russian Federation, and the Social Insurance Fund of the Russian Federation.

Loan payment holidays for businesses may be granted under Federal Law No. 106-FZ, which has a limited period of validity. For sole proprietors, unlike LLCs, there is an option to choose repayment of part of the loan payment. Requirements for Small and Medium Enterprises (SME) to obtain a payment deferral:

• the borrower must be included in the SME Register;
• the borrower's OKVED code must be included in the list approved by the Government of the Russian Federation;
• the loan agreement must have been concluded before 01.03.2022.

For a small or medium-sized business to obtain a deferral of loan payments, the person holding the highest administrative position in the company must apply to the bank. The application must specify:

• the name of the organization;
• its actual address;
• Taxpayer Identification Number (TIN);
• the specific type of loan and the agreement number;
• the grounds for loan payment holidays, the start and end date of the deferral, and its total duration;
• information on the suspension of payments.

A bank employee may offer you a template for such an application, which will need to be completed.

The law provides for three conditions under which sole proprietors and representatives of small businesses may apply for credit holidays in 2022 under loan agreements related to business activities.

• The borrower is listed in the register of small and medium-sized enterprises (Small and Medium Enterprises (SME)), maintained by the Federal Tax Service. This is confirmed by an extract from the relevant register.
• The loan agreement was concluded before 01.03.2022. If you have already taken a deferral for its repayment during the pandemic, that is acceptable. The law does not prohibit the arrangement of a repeated grace period.
• The business activity is related to one of the sectors affected by Western sanctions. Their list is set out in Resolution of the Government of the Russian Federation No. 337 dated 10.03.2022.

Sole proprietors may also apply for a deferral on personal loans (credits) concluded before 01.03.2022. If the purpose of the loan is not related to business activity, to obtain credit holidays it is sufficient to meet two conditions:

• The total loan amount does not exceed the threshold established by the Government of the Russian Federation. For sole proprietors – 350 thousand rubles. 
• The entrepreneur's income for the month preceding the application has decreased by at least 30% compared with 2021.

If the borrower does not meet at least one of the requirements, the bank is entitled to refuse to grant credit holidays.

Payment holidays can be compared to unpaid leave. The Borrower receives a payment deferral, but the bank accrues interest and adds it to the principal debt. It will still have to be paid, but the borrower gets time to restore solvency. The maximum period of payment holidays is 6 months.

Restructuring does not cancel the monthly payment, but reduces it to an affordable amount. The interest rate remains the same, but the debt is spread over time, making it easier to repay. This debt burden reduction option applies for the entire term of the credit agreement.

Which is better, payment holidays or restructuring, depends on the borrower's personal circumstances.

• The first option makes sense if the financial difficulties are temporary or arose for reasons beyond your control (pandemic, sanctions). Such a deferral will provide some breathing space and will have a less negative impact on your credit history.
• If payment holidays do not solve the problem, use loan restructuring. Although it may slightly damage your borrower reputation, it will help avoid overdue payments.

Credit history is a record containing information about all of the Borrower's credit obligations: which banks and financial institutions they applied to, what amounts they borrowed, how carefully they repaid their payments, and whether there were any delays. The more impeccable the client's reputation, the easier it is for them to obtain a loan next time.

If you apply for credit holidays, this is also reflected in your credit history. Such a deferral harms your reputation as a Borrower. The bank perceives it as a signal of instability in your financial position. For the bank, this is a risk, so upon subsequent applications you may be denied a loan or offered a higher interest rate.

Our advice is to use deferrals only as a last resort. If the situation is not critical and there is a possibility to reduce other expenses, continue repaying the loan. This way you will avoid the negative impact of credit holidays on your credit history.

1. The Borrower - LLC is included in the unified Register of Small and Medium-Sized Businesses;    
2. The loan agreement with the bank was concluded before the date of mobilization/the day the contract was signed;
3. The request for credit holidays (grace period) was submitted by December 31, 2023 inclusive;
4. Start date of the grace period:

• for LLCs - as specified by the borrower, but not earlier than September 21, 2022. If not specified by the borrower, the date the request to establish the grace period was sent to the bank
• • for individual entrepreneurs - for credit lines, not earlier than the date the borrower sent the request to establish the grace period; for lump-sum loans - as specified by the borrower, but not earlier than September 21, 2022. If not specified by the borrower, the date the request to establish the grace period was sent to the bank
  

For all existing small business Borrowers, the restructuring programs provide for: 

• A payment deferral for a period of 3 to 6 months inclusive
• An extension of the loan agreement term (if necessary)
  

• deferral of payments toward repayment of principal and interest for the duration of the grace period
• during the credit holiday period, no penalties (fines, late fees) are charged for the borrower's failure to perform obligations under the credit agreement
  
• the option of early repayment of the credit amount (part of the amount) without terminating the grace period
• The option to provide documents confirming participation in the Special Military Operation at the time of application or no later than the end of the grace period

If the borrower does not meet the conditions for granting credit holidays under 377-FZ and Article 7.3 of 106-FZ, the borrower may apply for restructuring under the bank's internal programs.

·       the option to provide documents confirming participation in the Special Military Operation at the time of application or no later than the end of the grace period. 

Credit holidays for entrepreneurs participating in the special military operation are an opportunity to suspend payments under an existing loan agreement with the bank. They may be granted both in accordance with the procedure established by the legislation of the Russian Federation (Federal Law No. 377-FZ and Article 7.3 of 106-FZ) and under the bank's own programs.  

• For Borrowers who are individual entrepreneurs mobilized into the Armed Forces of the Russian Federation or who have signed a contract, loan holidays are granted for the period of mobilization/contract + 30 calendar days
  
• For Borrowers that are LLCs, if the sole participant (owner) of the LLC, who during the period from September 21, 2022 until the date of mobilization is also the head of the company, is mobilized, and the company itself is included in the SME register, loan holidays are granted for the period of mobilization of the company participant + 90 calendar days

The grace period may be extended for the time during which the Borrower/company participant is undergoing inpatient treatment for wounds, injuries, contusions, or illnesses received during the special military operation, as well as for the time during which the participant in the special military operation is recognized as missing.