SMEs highlight concern over lack of banking loan access

SMEs highlight concern over lack of banking loan access

With smaller enterprises finding it difficult to access bank loans, solutions are being advanced that include loosening credit regulations and providing loans based on future assets.

The Ho Chi Minh City Union of Business Association last month released a survey on the business situation and raised solutions to support businesses.

SMEs highlight concern over lack of banking loan access

The report highlighted some of the most enduring challenges for businesses related to capital and new orders. Almost 40 per cent of businesses claimed it was difficult to ensure new orders, while almost the same proportion reported an increasing price of input materials, leading to high production costs.

Half of all feedback said that consumer demand was dropping sharply, directly affecting revenue and profits.

More seriously, 39 per cent of businesses said they were lacking business capital. These are factors that make the business situation, especially for small- and medium-sized enterprises (SMEs), challenging.

Renting land to set up a farm, and partnering with farmers to grow bananas and durians in the Mekong Delta province of Long An, Vo Quan Huy, director of Huy Long An Co., Ltd., said, “At the end of 2024, we struggled with many difficulties to restructure the growing area. The banks promised to provide some capital, but we have yet to access a loan.”

He explained that there are shortcomings in re-leasing land from farmers or forestry farms, such as lack of collateral, a land lease period of only 1-3 years, and considerable time to prepare relevant documents.

“Moreover, in the disbursement documents for agriculture, the cash flow in agriculture is too slow to apply preferential interest rates. It is far too difficult to access loans,” Huy said.

Do Phuoc Tong, chairman of the Ho Chi Minh City Association of Mechanical-Electrical Enterprises, said that mechanical industry revenues are not meeting a suitable investment level, and are weaker than foreign enterprises in all aspects. Therefore, to compete, they are finding ways to reduce capital costs through government support policies.

However, interest rate support loan packages have been interrupted for a long time, and numerous projects are not being supported.

“Currently, most enterprises apply for short-term loans from commercial banks at low interest rates, but this short-term capital is spent for medium- and long-term investment,” Tong said. “This is a vicious cycle that forces complexities on the mechanical engineering industry and is the greatest obstacle to its development.”

Meanwhile, Nguyen Dang Hien, vice chairman of the Food and Foodstuff Association of Ho Chi Minh City, said that although it was an essential industry, businesses in the industry were mainly SMEs or even smaller, so were struggling with numerous issues when it came to taking out a loan.

“Businesses are always concerned about how to access a loan with low interest rates from banks. Therefore, I hope that the State Bank of Vietnam (SBV) and commercial banks will pay attention and support businesses in the food and foodstuff industry,” Hien said.

A representative of the Vietnam Association of SMEs said, “Only 30-35 per cent of such businesses can take out a loan from a bank with their collateral. Only a few banks provide loans based on future assets. Therefore, this association suggests the government push credit institutions to apply mortgage loans based on future assets.”

Nguyen Kim Hung, chairman of Kim Nam Group, suggested the Ministry of Finance and the SBV consider regulations on identifying digital assets and methods for valuing digital assets, so that businesses will be able to access capital sources from commercial banks more easily.

“Other countries around the world also have many breakthroughs in identifying digital assets. If doing successfully, the cash flow from banks to SMEs will pour easily,” Hung said.

In another case, Do Quang Hien, founder and chairman of T&T Group, said that SMEs suffer from a dire need of capital, weak management, no collateral, and good ideas but not enough capacity to carry out business plans.

“Sometimes commercial banks accompany SMEs to provide not only credit but also advice,” he said. “There will be risks to approving loans, so we recommend the government and the SBV issue mechanisms and extend the scope of risk for them, as long as there is no negativity. We need a clear mechanism for bank staff to implement lending.”

VIR