Phạm Huỳnh Quang Hiếu, deputy director of the HCM City Department of Science and Technology, said while the Government’s policies could open the door to affordable capital, businesses must be ready to meet the requirements and make use of the opportunities available. — VNS Photo Xuân Hương

HCM CITY — HCM City startups are seeking more flexible financing to support expansion, saying access to capital is often a bigger challenge than its cost itself, particularly for technology businesses that must invest in equipment and infrastructure before generating revenues.

“For technology startups, especially those involving hardware, we are less concerned about whether the cost of capital is high or low than whether we can access capital in the first place,” Trương Minh Đạt, CEO of technology startup Benkon, said.

He said Benkon has two main product lines: IoT solutions for digitalising and centrally managing energy use, and a “Cooling-as-a-Service” model, both of which have strong growth potential but require the company to invest before earning revenues.

With sufficiently strong returns, the company can accept reasonable commercial financing costs, but what matters more is having access to capital in time to maintain its planned pace of deployment, he said.

Government support should therefore focus not only on reducing borrowing costs but also on developing financing mechanisms suited to different business models, he said.

“If a government fund or support programme can participate in 5-10 per cent of a project, it can provide additional confidence for commercial banks to join the financing.”

Dream Viet Education faces a similar funding gap as it prepares to expand its online education model to schools.

Hồ Hồng Bảo Trâm, CEO of Dream Viet Education – Kyna English, said Kyna had built an online education ecosystem serving more than 300,000 learners in more than eight Southeast Asian countries over more than the last 10 years.

The company plans to move from a fully online model to a hybrid approach combining online foreign teachers, on-site teaching assistants, and its AI Tutor platform.

The model is aimed especially at schools in remote areas where recruiting native English-speaking teachers is difficult and students can instead learn with foreign teachers online while receiving on-site support and using AI tools for practice, Trâm said.

But the transition requires upfront investment in equipment, technology, infrastructure, and school facilities before the company can recover its investment, he said.

“This is the funding gap that Kyna hopes to address through suitable financial mechanisms.”

The company hopes to work with the HCM City Finance and Investment State-owned Company (HFIC) and credit guarantee funds to secure financing for its expansion.

Hồ Hồng Bảo Trâm, CEO of Dream Viet Education – Kyna English, said the company hopes to work with the HCM City Finance and Investment State-owned Company and credit guarantee funds to secure resources for its expansion plans — VNS Photo Xuân Hương

Benkon and Kyna were among startups participating in the seminar “HFIC & Credit Guarantee Fund – Capital Gateway for Startups and SMEs”, organised in HCM City on August 25 by the Startup & Innovation Hub of HCM City, HFIC, and the HCM City Credit Guarantee Fund for Small and Medium Enterprises.

The event aimed to help businesses access financing for expansion.

Phạm Huỳnh Quang Hiếu, deputy director of the city Department of Science and Technology, said the city is targeting double-digit economic growth and implementing Politburo Resolution 57 on breakthroughs in science, technology, innovation, and digital transformation, and Resolution 68 on private-sector development.

The city has introduced several channels of support for businesses, with HFIC acting as a key intermediary under Resolution 09/2023. They include support for priority investment projects, credit guarantees for SMEs, direct budget support for innovation, venture capital, and regulatory sandboxes.

Hiếu admitted that the number of businesses getting interest-rate subsidies and credit guarantees remain modest compared with demand.

“The biggest bottleneck for startups and SMEs remains capital. Most businesses still have to rely on collateral to obtain loans, while a startup’s most valuable assets are often technology, intellectual property, and its people – assets that traditional credit systems find difficult to value.

The city is seeking to create a “capital chain across the business lifecycle”.

Government funding and venture capital would provide seed funding in the early stages, followed by credit guarantees and interest-rate subsidies as businesses expand, and market-based financing could then become available once companies had built sufficient financial capacity, he said.

Nguyễn Hà Lam, deputy head of HFIC’s planning and development research division, said eligible projects get interest subsidies ranging from 50 to 100 per cent on loans of up to VNĐ200 billion for a maximum of seven years.

To qualify, projects must align with the city’s socio-economic development plans and pass HFIC’s assessment of their effectiveness and debt repayment capacity.

For startups lacking collateral, the credit guarantee mechanism can cover 100 per cent of a loan, provided the business has equity capital equivalent to at least 15-20 per cent of the project value and no tax dues, he added.

Hiếu said Government policies could open the door to more affordable financing, but businesses must be prepared to meet the requirements and make effective use of the opportunities available.

Access to preferential financing requires sound management systems, transparent financial practices, and a credible business plan, he noted. — VNS