Loan procedures for businesses need to be loosened in some places and tightened in others.

Businesses say it's difficult to access, banks say they're comfortable lending

At the seminar on removing capital bottlenecks for Small and Medium Enterprises (SMEs) organized by Dan Tri newspaper on June 22, Mr. Tran Anh Quy - Head of State Policy Credit Department, Department of Credit for Economic Sectors, State Bank said that by June 15, 2023, outstanding credit of the whole economy reached about 12.32 million billion VND, an increase of 3.36% compared to the end of 2022, an increase of 8.94% compared to the same period last year.

"It can be seen that the overall credit growth rate of the entire economy is slower than the same period last year," Mr. Quy commented.

Of which, credit to small and medium enterprises grew by about 3%. Credit growth was still lower than expected due to reduced credit demand and the economy's difficulty in absorbing capital.

According to Mr. Quy, businesses are affected by the difficult developments, which contain many unstable factors of the world economy. Domestically, the activities of small and medium enterprises have declined in both business results and operating efficiency, causing investment demand to decrease, causing credit activities to decrease accordingly.

The common reasons leading to the difficulty in accessing capital for SMEs as well as making it difficult for credit institutions to lend are that the support for these businesses in the recent period has not fully promoted its superiority and mission in supporting.

Some customer groups have needs but have not met the loan procedures, there are many legal problems as well as access to business credit continues to be limited due to inherent characteristics from the past due to small scale, low management capacity. These weaknesses continue to appear more than in the previous period.

Finance - Banking - Loan procedures for businesses need to be loosened in some places and tightened in others — Ms. Trinh Thi Ngan - Head of Advisory Board of Hanoi Association of Small and Medium Enterprises.

At the discussion, Ms. Trinh Thi Ngan - Head of the Advisory Board of the Hanoi Small and Medium Enterprises Association (HanoiSME) also said that businesses want to borrow money, banks want to lend, but to go together is an extremely difficult problem, very difficult to solve, and has been a problem for many years. Businesses always complain about the difficulty of accessing banks, banks always complain that we are always comfortable to lend.

However, regarding procedures, Ms. Ngan believes that there are places that need to be loosened, and there are places that need to be tightened, not everything is too tight. “I think that for small and weak businesses, there are some things that need to be loosened. What belongs to previous practices, we have followed customers and understood very well, so there are some procedures that need to be loosened,” she said.

The most important thing is the business production plan that accompanies them, manages cash flow, for example, buyers, sellers, and supervising banks. We disburse in packages, not a plan of I borrow 10 billion VND and then disburse 10 billion VND.

Need effective business plan

Commenting on the current capital bottleneck of SME enterprises, Mr. Ngo Binh Nguyen, Director of Small and Medium Enterprises, Orient Commercial Joint Stock Bank (OCB) shared that it is still an effective business solution.

Businesses need to determine if they offer a product or service to customers, what problem do they solve for their customers.

Second, when they have identified the value of their products and services and solved customer problems, they must figure out how to make money from those products and services.

That means they must have a financial plan and financial model to develop those products and services to bring in revenue and profit, and that is the business plan.

"Regarding legal barriers, many of our industries currently require very strict legal requirements and when SMEs participate in those playgrounds, they need to have a very clear understanding to manage their own legal risks and meet legal requirements when making credit transactions with banks," said Mr. Binh.

Another limitation is about collateral. Currently, in the Vietnamese market, transactions on cash flow management and finance of SME enterprises are still confused between the story and finance of their business and their personal finance.

Finance - Banking - Loan procedures for businesses have some areas that need to be loosened and some areas that need to be tightened (Figure 2). — Mr. Ngo Binh Nguyen, Director of Small and Medium Enterprises, OCB Bank.

They can use the business's cash flow to serve some personal activities and vice versa. So if that lack of transparency continues to be confused and leads to not seeing the real picture of the business, it will create a blur and can lead to appropriate credit decisions for SME businesses.

Sharing the same view, Mr. Le Duy Binh - economic expert also commented that small and medium enterprises need to improve their cash flow management capacity and find the best way to use capital to ensure production and business activities.

They need to do exactly what they committed to the bank when borrowing capital, serving the sustainable development of their own business and repaying the capital to the bank. This is an important tool to help them grow and restore production and business.

“Business management capacity, especially financial management, operational risks, financial risks, market risks, and legal risks are things that businesses must consider when borrowing capital from banks,” said Mr. Binh .

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