Small-and-medium-sized enterprises (SMEs) face overlapping debts, causing capital shortages for implementing new orders.

Nguyễn Xuân Trung, general director of Hòa Trung Company Limited, said his company had to refuse an order to export agricultural products worth nearly VNĐ10 billion (US$434,000). The reason was due to a lack of capital to buy materials and hire more labourers.

“We have sources of capital. However, our partners have paid only 30 per cent for old orders and the remaining payments will be in the next three months. Meanwhile, new partners need deliveries quickly,” Trung said.

He added that he contacted some banks, submitting both old and new contracts to borrow capital for new orders. He committed to pay the loans immediately after receiving payments from old orders. However, the banks rejected the proposal because he had no mortgaged assets.

The same situation has occurred for many firms, especially SMEs. They therefore missed out on business opportunities. To maintain their orders, many companies had to borrow from loan sharks.

Firms found it hard to have capital in the market as there were no official channels providing short-term capital quickly, especially for SMEs and micro businesses.

A general director of a company producing animal feed said his company imported nearly 10 million tonnes of materials for production per month. However, the products are often sold to agents. The payments from agents would normally be sent after three months or even longer. This was the reason that his company has often suffered temporary capital shortage.

“We calculate that if we could borrow short-term loans within 6 months, our company could ensure quick capital return and achieve profit of at least 20 per cent. However, most banks require mortgage assets with strict requirements, making it hard for small firms like us to access such loans,” he said.

In addition, loans from the black market with high interest rates would also result in poor or no profit.

Currently, many banks offer credit products with more simple conditions and quick approval to untie businesses’ capital difficulties. Some banks have built lending packages which use goods and debt claims as mortgaged assets. However, lending through debt claim rights has been limited and mostly applied for big companies as the commitment and compliance in Việt Nam has not been high.

Many businesses often face delayed payments, affecting their repayments to banks.

The difficulties are bigger for SMEs. Lending for SMEs, which account for a majority of firms in the market, has been a big question.

Việt Nam Prosperity Joint Stock Commercial Bank (VPBank) therefore has provided invoice financing loans with value-added-tax (VAT) invoices used as collateral. This is a combination of both secured and non-secured loans.

To get this kind of loan, small and medium enterprises only need to show contracts with reputable partners and VAT invoices as collateral.

Enterprises will be offered loans of 90 per cent of the value of VAT invoices with a lending term of six months. The loans will be disbursed within a maximum of 24 hours upon approval.

According to VPBank, the loans will help enterprises be more active in their production and business activities.

Experts said the lending based contracts and invoices have been applied in many countries around the world for a long time. The solution helps the capital return rate, promoting economic development. In Việt Nam, there are not many banks that dare to lend to businesses in this way due to risk aversion.

VPBank’s leaders said the approval of the loans would not only be based on contracts but also their prestige, real business situation and partners. VPBank has been a pioneer in providing loans with VAT invoices and contracts to resolve capital difficulties for a high number of businesses.

Details of the lending packages are available at  tại đây or by contacting 1900545415/2.