Small and medium size enterprises (SMEs) desire to expand their business but do not have enough capital, while banks are still cautious to lend to this group. What do SMEs need to do?
According to the general Statistical Office, in the first six months of 2019, there were nearly 67,000 newly registered enterprises with a total registered capital of 860.2 trillion dong, an increase of 3.8 percent in the number of enterprises and an increase of 32.5 percent of the registered capital compared to the same period in 2018. However, the number of enterprises temporarily suspending business in the first half was 21,100, up 17.4 percent over the same period last year. The number of enterprises that stopped operating and waited for dissolution procedures was 21,800.
Economic experts analyse that SME existing for two years since their establishment will have further development opportunities, otherwise they will “die prematurely”, especially the start-up. Therefore, it is not too difficult to understand when most banks are reluctant to lend to this group of businesses.
A senior leader of Joint Stock Commercial Bank for Foreign Trade of Vietnam (Vietcombank) said that in order to meet the increasing standards of governance in accordance with international practice, the bank set many requirements for borrowers, in which the standard ones are based on legal regulations and all businesses need to comply. With SMEs, when they first joined the business, the financial accounting system had not been updated regularly, the transparency of information was not high, making it difficult to meet these requirements.
In the same view, the representative of Lien Viet Post Joint Stock Commercial Bank (LienVietPostBank) said that the financial reporting system of small businesses, especially microenterprises had not yet been adjusted, incomplete, or inaccurate, which made it difficult for banks to perform customer information appraisal.
Pham Duy Hieu, Acting general director of An Binh Commercial Joint Stock Bank (ABBank), said that SME customers accounted for a relatively low proportion in ABBank’s customer base, at about 19 percent.
However, SMEs account for the majority of businesses, playing an important role in the economy, so banks are proactively offering many solutions to help these businesses access capital.
Vietcombank’s representative said that one of the first conditions that the bank was particularly concerned when appraising the loan application was the transparency in its business operations. The enterprises with a well-managed business system would make it easier for the bank to make lending decisions. Therefore, SMEs need to apply internal management systems to meet the increasing requirements for loan conditions.
Quach Hung Hiep, deputy general director of Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) said: “Enterprises also need to actively improve operational capacity, executive management, finance, self-improvement of competitiveness to meet loan conditions from the bank”.
Talking to reporters of the Securities Investment Newspaper, Nguyen Lan Huong, deputy director of the personal banking sector, Tien Phong Commercial Joint Stock Bank (TPBank) commented, there were SMEs who prepared unqualified and unprofessional financial statements. Even, there were customers who made poor financial statements with fake data. This was one of the risks that banks often encountered.
There are many technology companies in the market that provide accounting services that allow them to connect with banks. SMEs should take advantage of these solutions, help improve financial efficiency, and create transparency and trust with banks.
At that time, with the criteria of customer assessment already filtered such as the health of the financial situation and the business in normal operation, banks can select the right customers as well as provide solutions to solve the difficulties of capital for SMEs.
