Besides land and administrative procedures, capital access is one of main barriers for small and medium-sized enterprises (SMEs) at the moment. To promote internal force, enterprises need to efficiently use their capital in various ways such as minimising costs, and upgrading technologies to increase productivity and working efficiency. We would like to quote some enterprise’s ideas on calling for capital at the current challenging moment.
Plenty of solutions for wood enterprises
Mr Nguyen Ton Quyen – Vice Chairman, General Secretary of Vietnam Timber and Forest Product Association
In the current hard times, member enterprises have applied many solutions to get capital. First, they should negotiate with foreign partners that buy Vietnam’s wood and pay in advance. This method is popular and efficient. Second, some SMEs have mobilised capital from their own members in their enterprises at an interest rate equal to the bank. Third, many enterprises trading wood have sold wood to invest into manufacturing wooden products. These are very popular ways in wood enterprises at the moment.
In addition, for the past two years, the association has fostered linking and associating among enterprises to together assist and share with each other in hard times. For example, big enterprises such as Truong Thanh, Khai Vi, and Hoang Anh Gia Lai, when receiving orders, share with other small ones to distribute production and capital.
The association itself has proposed that the Ministry of Finance consider deducting the tax, value added tax, resource tax etc. The Ministry has hold a meeting and promised to take this under consideration.
As for banks, we have worked with BIDV in Binh Dinh, they approve solutions of lending enterprises at current interest rate but calling back in various ways suitable for each enterprise’s situation. Moreover, we have worked with TechcomBank on this issue and they are currently taking surveys.
Mortgage loans
Ms Nguyen Thi Dien – General Director of Shoe Knitting and Sewing An Phuoc Limited Company
Currently, we only make short-term loans to purchase materials for production. We have the advantages of good partnership, regular export volume as well as regular foreign currency transferred to the bank. Besides, there’s always seaming production, therefore, this amount of money can stay in bank, based on which the enterprises can make loans from the bank. This can be considered a form of mortgage to borrow. In addition, we mortgage cloth freights. For example, with the cloth freight of US$100,000, we have mortgage of US$30,000, the bank lends us 70 percent on a mortgage of that cloth freight itself.
Our partners are all big corporations and have partnership up to 15 years, all of the enterprise’s transactions are via bank. Therefore, the bank can see the enterprise’s regular amount of money, being ensured when lending.
We hope the Government considers reducing the interest rate to ease difficulties for enterprises; and recommend banks to assist enterprises to borrow with trust.
Enterprises narrowing production due to lack of capital
Mr Nguyen Thai Hoc – Chairman of Vietnam Cashew Association
Quarter II is when enterprises buy materials from Africa. Total demand for capital of the industry is VND 25,000 billion, in the season of buying materials VND12,000 billion is needed, in which there has been only VND 6,000 billion available. With high interest rate, enterprises still can hardly access the capital. At current interest rates, production of one tonne of cashew for export costs about US $8,100. With export cashew’s price of US $ 7,700 per tonne, enterprises will suffer a loss of US $400 per tonne, not mentioning costs of petroleum, labour and materials increased by 1.8 times. Enterprises need VND 180 billion instead of VND 100 billion as in 2010. However, banks are reducing lending limits, which causes the enterprises in the industry to cut production.
In my opinion, banks should lend a hand to cashew industry enterprises and release the capital for material input, avoiding 2010’s situation when India bought up cashew at low prices ahead of Vietnamese enterprises.
Hard to find preferential loans
Mr Tran Khai Thanh – Director of Tan Kim Thanh Limited Company (Ho Chi Minh City)
At the moment, we borrow capital from Asia Commercial Bank, which is a private bank; therefore, it’s not too difficult to get loans. However, the too high current interest rate directly influences the production and business of the enterprise. When the interest rate increases, the banks themselves automatically raise the interest rate without notifying borrowers, which sometimes puts enterprises in a dilemma. Getting loans from private banks is easier, but assets will be appraised at lower price. For example, for a one billion VND house mortgage, the bank only prices it at VND700 million, half of which is available for enterprises to borrow. It is obvious that total sum called out from the bank is very difficult and does not meet the enterprises’ demand.
At the moment, enterprises’ rate of profit is falling significantly due to capital tie-up, which is caused by late payment and high interest rate. Meanwhile, in order to access capital, enterprises must pay the “lobby cost.” Actually, for small enterprises, seeking favourable capital is as hard as looking for the proverbial needle in a haystack.
Q.A
Vietnamese
