City's businesses in need of capital injection soon
City's businesses in need of capital injection soon
Firms are in desperate need of capital to resume operations, said business leaders and experts.
As the end of the year approaches, businesses have been ramping up efforts to get back into the game, especially to meet greater demand for goods and services in the upcoming holidays.
HCM City's food producers must secure a large amount of capital soon so they can stockpile raw materials and plan their production in anticipation of Christmas and traditional Tet holidays, said Ly Kim Chi, president of the HCM City Food and Foodstuff Association.
A capital injection is especially vital at this point because most businesses have run out of what little emergency funds they had during the lockdown as it was costly to keep production running using the three-on-site method, which required businesses to provide workers with accommodation, food and COVID-19 tests.
Do Phuoc Tong, president of the HCM City Mechanical and Electrical Enterprise Association, said securing bank loans would likely prove to be a challenge for most small-to-medium-sized enterprises as they lack assets to put up as collateral.
Businesses had asked commercial banks to relax regulations to support businesses during the pandemic.
"The majority of mechanical and electrical firms are those who have developed slowly over time from small businesses and as such, they often have a solid foundation and strong expertise. While said firms rarely go under, commercial banks aren't particularly interested because of their low-profit margin," said Tong.
Nguyen Quoc Anh, president of the HCM City Rubber and Plastic Association, said the association members had been struggling to cope with higher input prices, as much as a 20 per cent increase, since the beginning of the year. There has been a shortage of raw materials as the global economy was recovering, which will likely drive prices up even further. To make matters worse, other costs including COVID-19 prevention and logistics have also been climbing.
Meanwhile, demand had not fully recovered and sales had been slow, which severely affected cash flow. The grim situation was expected to last at least until the end of the year.
"As of now, most of our members have run dry on cash to meet their financial duties. We have asked commercial banks to consider granting credit extensions and debt restructuring, especially in support of domestic businesses," said Anh.
There is still room to give additional credit to businesses in HCM City, according to Nguyen Hoang Minh, deputy director of the State Bank of Vietnam's (SBV) HCM City branch.
Minh said since the beginning of the year, credit growth in the country's largest economic hub was recorded at 6.41 per cent. By the central bank's projection, credit growth for the whole year would likely hit 12 per cent, giving banks a lot of room to manoeuvre during the last quarter of the year.
Commercial banks said they were to cut interest by 1 per cent along with waiving banking fees, a move that has been well received by the business community. By SBV's estimation, 400,000 businesses were to benefit from this support package.
"We have demanded banks to give all the support they can to help with economic recovery and to support businesses. The SBV will stay committed to seeing banks fulfilling their pledges and those who failed in doing so will face sanctions," said Minh.
Another of SBV's priorities in the months to come is to help connect businesses and banks. So far, a number of commercial banks have pledged to support businesses with VND70 trillion (US$3.07 billion) in low-interest loans during the last quarter of the year.
Regarding some businesses' inability to provide collateral, Minh said the SBV had been working on a number of alternative methods to allow both businesses and banks to overcome current regulatory hurdles.
