Cash-strapped businesses remain starving without access to credit

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Construction company Dai Dung in Ho Chi Minh City has struggled to borrow from banks at interest rates of 8-10% per annum, which is almost its profit margin.

“To pay this interest, we need to have a profit margin of 15 to 20 percent, but it’s difficult at present,” deputy general manager Trinh Manh Hung said. VnExpress.

Many of Dai Dung’s partners and suppliers also face similar difficulties, as only companies with strong financial contingency plans and good collateral can get loans easily, Hung said.

But even these companies can be rejected because many banks have reached their credit quotas and loan applications are no longer being approved quickly, he added.

Companies in other sectors are also struggling to obtain bank loans.

In the food industry, operating and input costs have increased due to inflation, which means food companies need to increase their capital by more than 50%, said Ly Kim Chi, president of the Food and Foodstuff Association of HCMC.

The need for cash is all the more urgent as companies must prepare production for TetVietnam’s biggest holiday which falls in January next year, she said.

However, many food businesses have complained that they cannot borrow from banks because the banks have exhausted their credit quotas.

“The banking sector should consider prioritizing food businesses in accessing loans so that they can maintain food price stability and thus help control inflation,” Chi said.

Pham Ngoc Hung, vice president of the HCMC Union of Business Association, pointed out that money is the biggest need for business today.

After the Covid-19 pandemic, many small and medium enterprises exited the market due to lack of access to finance. Lenders require collateral that these companies do not have, he said.

Tourism companies, for example, need cash to accelerate their recovery, but they operate in the service sector and therefore do not have collateral such as land or factories, said Bui Thi Ngoc Hieu, deputy director of the department. of HCMC tourism.

Sterile incentives

The Vietnamese government has planned 2022 as a year of recovery after two years of pandemic imposed by economic challenges. Its stimulus plan provides for a 2% interest deduction on business loans, but companies are struggling to take advantage of this incentive as banks say they have reached the maximum amount of loans allowed by the central bank.

The government intended to provide VND16 trillion ($674.54 million) in loan interest support this year, but three months after the program was launched, only VND1 billion has been disbursed.

Tran Minh Tu, CEO of metal tool maker Kem Nghia at HCMC, told HCMC that many companies are having difficulty getting new loans, with banks only agreeing to lend the amount they repay on existing loans. . For example, they would only lend 5 billion VND if the company had already repaid that amount on an existing loan.

Businesses with slow cash flow and weak sales will find it even harder to get loans, he added.

Nguyen Van Be, chairman of the Ho Chi Minh City Export Processing Zone and Industrial Park Authority Business Association, said many companies have delayed plans to expand and upgrade. level of their technology due to lack of cash.

Some companies are also concerned that with the increase in interest rates on deposits, banks will also increase interest rates on loans.

Several lenders like SCB, OCB and VPBank have raised their interest rates on deposits from 0.8-1% since the start of the year to 6.2-7.3% per annum.

Economist Can Van Luc said small and medium-sized businesses need to consider other funding channels

Leasing is an alternative option because the finance company will generally be the legal owner of an asset while the lessee has operational control of the asset and the risks and economic returns are shared, he said. declared.

There are at least 11 leasing companies in Vietnam and this industry is expected to grow further in the future, Luc said.

Another option is to approach venture capital funds, he added.

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