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Banks showing businesses the door
As banks are refusing to give loans, businesses are having to be creative about finding capital for investment projects.
Though banks are ordered to lend at 18% per annum at maximum, they are only providing loans at 20-21% per annum. In many cases, even then they are refusing to give loans. It is because they are not allowed to have the credit growth rate of more than 30% over last year.
As a result, businesses have to seek capital at non-bank sources. Le Thi To Quynh, the owner of a business in Tan Binh district in HCM City, after failing to borrow money from banks, decided to call her friends and relatives to ask for capital contributions.
“I need money urgently for a steel import deal. If you have money, give it to me. If I can make profit, I will share it with you,” she told her friends.
Her friends who had idle capital agreed to give money to Quynh, one gave VND50mil, the other VND500mil. Finally, she got the money she needed.
“As money is outflowing from the stock market, being buried in real estate projects and not available at banks, businesses have no other choice than seek capital from friends, relatives or partners,” Quynh said.
Necessity still the mother of invention
It seems that capital inflow is going from idle sources directly to businesses. Businesses accept paying interest rates higher than bank deposit interest rates, but lower than their lending interest rates.
Never in the past did businesses have to trust in each other as nowadays. They have to, because if they don’t, they will not get capital for production and business.
In order to continue implementing real estate projects, V. Company decided to sign contracts to borrow money from clients at interest rates equal to banks’ deposit interest rates. In return, the clients get the promise from V. to be able to purchase apartments when the project is completed. The cooperation proves to profit both sides. V. can borrow money at ‘soft interest rates’, while clients can purchase apartments.
The director of a real estate firm, which is going to execute a project in district 7 in HCM City, said that he needs some VND258bil to run the project, but he has arranged VND30bil only. In the immediate time, he needs VND80bil for the first phase of the project. He will have to pay VND800mil in interest if he borrows the sum of money from clients, while he will have to pay VND1.2bil at least if he borrows money from banks.
Mobilising capital from partners and clients also proves to be a good solution. An automobile importer asks clients to pay money in advance so that it has capital to import cars. A computer company’s clients accept paying money first and getting products later. Meanwhile, Maseco decided to mobilise capital from the staffs of the company.
Le Thu Huong, Deputy General Director of Habubank, said that enterprises are now issuing corporate bonds, considering this a suitable way to mobilise capital. She said Habubank has helped many enterprises get capital by issuing bonds instead of borrowing money from banks.
VNN
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