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Small, medium-sized businesses hunt for capital
Investment funds are becoming a new source of capital for small- and medium-sized companies that have had difficulty getting bank loans.
Bach Tuyet Cotton Joint-Stock Company (BBT), for example, expects to avert bankruptcy if it can attract money from investment funds.
BBT general director Ta Xuan Tho said at the company’s annual shareholders’ meeting on Monday that the firm was on the edge of bankruptcy because it lacked working capital.
Currently, BBT is VND34 billion (US$2.15 million) in debt and has a short-term bank loan of VND15 billion, which must be paid back in August and September. If it is unable to pay the loan, BBT’s assets will be sold by the bank.
Trading in the company’s shares were suspended on the HCM City stock exchange last week because BBT had not made profits in the previous years, which is required under state regulations for continued trading.
The only way for BBT to survive is to offer retail shares to outsiders, including investment funds, Tho said.
Three institutions, including two that are foreign, have pledged to buy shares of the company, which would help BBT increase its registered capital from VND68.4 billion to VND150 billion.
Bank loans out of reach
BBT and many other small- and medium-sized enterprises (SMEs) see non-bank financial sources, particularly investment funds, as a way of settling their current capital problems.
Even in the past when local banks’ capital sources were abundant, only 30 per cent of the country’s SMEs could get bank loans, market experts have said.
Bank loans are currently more difficult to obtain because local banks’ lending requirements are stricter and interest rates are higher.
Cao Sy Kiem, chairman of Viet Nam’s Small- and Medium-Size Enterprises Association, said: "Most SMEs have modest prescribed capital, which is often less than VND10 billion ($625,000) so their trading and production activities are mainly based on loans."
"In addition to existing difficulties, SMEs now have to face many new barriers to get loans since the state tightened monetary policy to cope with inflation," Kiem said.
Because local banks’ current capital sources are not as plentiful as they were in the past, they have become highly selective about loan customers.
"The high lending interest rate is another obstacle," he added.
The ceiling interest rate on loans is now a high 21 per cent, which most SMEs find difficult to pay.
Vu Duy Thai, chairman of Ha Noi Trade and Industry Association, said the association’s member companies cannot afford the high interest rates on loans.
Do Thu Ha, director of MA Company, said with the current rate of 21 per cent, her company would not be able to borrow money from banks unless it could make a profit equivalent to 35 per cent of its total turnover.
Ha said her company and many other SMEs were seeking ways to get access to non-bank capital, including investment funds, so they could expand their businesses.
New trend
The trend is now for investment funds to shift pouring money into listed companies to SMEs involved in production of consumer goods, a sign that many small businesses find encouraging.
Since the beginning of the year, many SMEs have sold part of their holdings to investment funds.
MobiZ.com, for example, has sold 30 per cent of its stocks to Dfi VinaCapital under VinaCapital. As much as 30 per cent of Diana’s stocks have been sold to international investment company Goldman Sachs.
Mekong Capital’s Mekong Enterprise Fund II (MEFII) has also pledged to invest $5 million in the Mai Son joint-stock company.
Meanwhile, the Viet Nam Fan Company has transferred 25 per cent of its stocks to Denmark’s Bankinvest. VinaCapital Managing Director Andy Ho said that the company had signed six contracts with domestic companies this year, with investments ranking from $10 million to $20 million.
VNS
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