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Why do not many businesses have access to loan support?

Mr. Nguyen Hoang Minh, Deputy Director of the State Bank of Ho Chi Minh City Branch, revealed that after a month implementing Circular 01/2020 / TT-NHNN of the State Bank on debt, rescheduling, exemption or deduction of interest and fees, retention of debt category to assist borrowers affected by the Covid-19 pandemic, more than 168,000 customers in Ho Chi Minh City have received support from this policy.

“In the context of social distancing, banks face difficulties to connect customers to identify correct damages and implement support mechanisms, it is a very encouraging result owing to enormous efforts of banks,” Mr. Minh added.

However, in order to access the policy, enterprises must collect persuasive evidence about damages which are caused by the pandemic and credit institutions will study every submitted case carefully based on three elements: cash flow, revenue and business results. In fact, many businesses have not fulfilled enough.

In terms of commercial banks, Mr. Hoang Minh Hoan, Deputy General Director of SCB, said that in the first four months of 2020, SCB's loan balance grew by 2.2%, the lowest in recent years due to Covid-19 which affects revenue and limits the capital needs of enterprises.

Regarding the implementation of Circular 01 of the State Bank, by the end of April, SCB's outstanding debt was restructured at VND9,000 billion and there are still many business documents are under review.

“This year we do not set profit targets, but to focus on supporting businesses instead. And the bank also sets aside a budget of VND500 billion to support businesses in the future,” Mr. Hoan said.

He also affirmed that there is no delay or obstacles from the banks to the enterprises’ demands. However, the banks are strictly subjected to the laws so they must set specific criteria to identify correctly those who are affected by the pandemic in order to implement the supporting policies properly.

In order to speed up the support for businesses affected by Covid-19, the Ho Chi Minh City State Bank has proposed three solutions. Firstly, credit institutions must formulate their criteria on debt structure and loan interest reductions. Secondly, credit institutions must develop internal procedures which can shorten the processing time for documents but still ensure adequate legal factors. Thirdly, the institution's criteria on credits and processes must be transparent. The SBV will examine and control credit institutions' fulfillment of the above requirements. Mr. Minh also said, any unit that violates the above regulations will be strictly punished.

So, what do enterprises need to do?

The unexpected difficulties brought about by the pandemic have shown the important role of business planning and scenario forecasts in order to propose the best financial management plan.

Ms. Lam Ngoc Hao, Deputy General Director of KPMG Vietnam, recommends that under the current difficulties, businesses need to sharply cut costs, focus on short-term costs, and negotiate with suppliers to reduce and extend debts.

Moreover, they must mobilize every resource from customers as quickly as possible even to reduce the price to collect money.

For accumulated businesses, Mr. Dang Van Thanh, Chairman of TTC Group, emphasized that during the epidemic period, enterprises should take this "dry salary" to maintain., hold on, and avoid unnecessary borrowings which increase financial costs.

Mr. Nguyen Hoang Minh also affirmed that the bank guaranteed sufficient credit sources and committed not to exclude lost businesses from the loan lists. The key problem is that in order to lend, the bank has to accept that this is a short-term loss and if the enterprises can prove its ability to recover and offset their losses.

Sharing the same view, Mr. Hoang Minh Hoan, Deputy General Director of SCB said, during the post-pandemic period, only loyal businesses with current credit transactions will be considered to extend debt and loosen lending limits. In contrast, new ones must submit reliable financial statements which are audited by an independent audit company.

"We have a policy of unsecured lending, but businesses must operate efficiently and with transparent information," Mr. Hoan said.

In terms of information transparency, Ms. Lam Ngoc Hao revealed that many small businesses currently devalue the role of accounting which violates a very comprehensive sample of reporting system proposed by the Ministry of Finance.

Therefore, it is necessary for enterprises to record accounting data in order to prove their financial history. As a result, enterprises are easy to apply for not only loans but also from other sources.