Direct loan preference for SMEs
VGP - The Government issued Decree No. 39/2019/ND-CP on the organization and operation of the small and medium-sized enterprises development fund (“Decree 39”) on May 10, 2019.
Question: What are regulations on direct loans which Small and Medium-Sized Enterprises will be given from the SMEs Fund to implement projects, business and production plans?
Answer: Under Decree 39, small and medium-sized enterprises (“SMEs”) will receive support from the SMEs development fund (“Fund”).
They are entitled to loans to implement projects, business and production plans.
Enterprises meeting criteria for determining SMEs under the Law on Support for Small and Medium-Sized Enterprises will be granted direct loans from the Fund or indirect loans from a commercial bank designated by the Fund upon their fulfillment of the following conditions:
- Having a feasible project, production and business plan (i) on exploitation of intellectual property specified in the Law on Intellectual Property or new technology specified in the Law on Transfer of Technology or new business models for innovative start-up SMEs; (ii) being located within the geographical area of the industry cluster and having business cooperation contract with other enterprises of the industry cluster or collaboratively establish and use a regional brand for SMEs participating in industry clusters; and (iii) being implemented to directly create added value for products of the value chain or having business cooperation contract with enterprises directly creating added value for products of the value chain for SMEs participating in value chains.
- Owner of the project, production and business plan contributes a minimum 20% of the total investment capital to perform the project or production and business plan and must ensure the adequacy of capital resources for implementation;
- Complying with measures of securing loans provided by the Fund with respect to each project, production and business plan and in accordance with the laws on secured transaction.
Lending interest will be equal to 80% of the lowest lending interest rate determined by comparing lending interests of four state-funded commercial banks of which total property value is highest at the time of determination of the Fund’s lending interest.
The loan of each project or production and business plan must not exceed 80% of the total investment capital of such project, production and business plan.
The term of SMEs’ loan is flexible depending on repayment capacity and specific conditions of each project, production and business plan of an enterprise, but not in excess of a maximum of seven (07) years.
SMEs will enter into direct loan agreements when borrowing directly from the Fund and indirect loan agreements when borrowing indirectly through banks./.