From June 10, 2024, what are the conditions for applying for loans granted from the Small and Medium Enterprise Development Fund by enterprises in Vietnam?

Main Content

• From June 10, 2024, what are the conditions for applying for loans granted from the Small and Medium Enterprise Development Fund by enterprises in Vietnam?
• What is the maximum loan amount of the Small and Medium Enterprise Development Fund in Vietnam?
• What are the risk treatment approaches in Vietnam?

From June 10, 2024, what are the conditions for applying for loans granted from the Small and Medium Enterprise Development Fund by enterprises in Vietnam?

Under Article 16 of Decree 39/2019/ND-CP amended and supplemented in Clause 9, Article 1 of Decree 45/2024/ND-CP, the conditions for applying for loans granted from the Small and Medium Enterprise Development Fund by enterprises in Vietnam are specified as follows:

Conditions for loans

1. Small and medium enterprises running innovative startups shall be entitled to loans granted by the Fund provided that they meet the following requirements:

a) Meet criteria for small and medium-sized startup enterprises as prescribed in the Law on assistance for small and medium-sized enterprises and its guiding documents;

b) Have feasible business projects or plans which must satisfy criteria for small and medium-sized startup enterprises;

c) Ensure the equity participation in a production and business project or plan makes up at least 20% of the total investment capital to implement that production and business project or plan, and ensure sufficient capital for implementation of a production and business project or plan;

d) Meet regulations on loan guarantee laid down herein.

2. Small and medium enterprises participating in inter-sectoral complexes shall be entitled to loans extended by the Fund when meeting the following requirements:

a) Participate in sectoral complexes in accordance with provisions of the Law on assistance for small and medium-sized enterprises and its guiding documents;

b) Have feasible business projects or plans in sectors or fields of sectoral complexes;

c) Meet the requirements set forth in Points c, d Clause 1 of this Article.

3. Small and medium enterprises participating in value chains shall be entitled to loans extended by the Fund when meeting the following requirements:

a) Participate in value chains in accordance with provisions of the Law on assistance for small and medium-sized enterprises and its guiding documents;

b) Have feasible business projects or plans, and have products in these value chains;

c) Meet the requirements set forth in Points c, d Clause 1 of this Article.

Thus, depending on each type of small and medium enterprise, there will be different conditions for applying for loans.

Types of small and medium enterprises, including small and medium enterprises running innovative startups, small and medium enterprises participating in inter-sectoral complexes, and small and medium enterprises participating in value chains, must meet the conditions prescribed above to apply for loans from the Small and Medium Enterprise Development Fund.

What is the maximum loan amount of the Small and Medium Enterprise Development Fund in Vietnam?

Under Article 18 of Decree 39/2019/ND-CP regulating loan amounts and terms:

Loan amounts and term

1. The loan amount applied to each production and business plan or project shall not be 80% greater than total investment outlay of that plan or project. The total loan amount of the Fund to small and medium enterprises shall not be 15% greater than the actual chartered capital of the Fund.

2. Loan term shall be determined depending on capital recovery and repayment capacity of each enterprise and specific conditions of each production and business plan or project, but shall not exceed seven (07) years.

Thus, the loan amount applied to each production and business plan or project shall not be 80% greater than the total investment outlay of that plan or project.

The total loan amount of the Fund to small and medium enterprises shall not be 15% greater than the actual chartered capital of the Fund.

What are the risk treatment approaches in Vietnam?

Under Article 40 of Decree 39/2019/ND-CP, the risk treatment approaches of the Small and Medium Enterprise Development Fund include:

Risk treatment approaches

1. Approaches to treating risks incurred from direct loan outstanding of the Fund shall be comprised of:

a) Adjustments in debt repayment term/debt owed;

b) Debt rescheduling;

c) Debt charge-off;

d) Outstanding interest write-off;

dd) Outstanding principal write-off;

e) Debt sale;

g) Disposal of property put up as security for borrowed funds;

h) Other risk treatment measures prescribed by law.

2. Risk treatment approaches to indirect loan outstanding shall be subject to regulations adopted by the State Bank of Vietnam on risk treatment approaches to credit operations.

Thus, the risk treatment approaches of the Small and Medium Enterprise Development Fund include:

Approaches to treating risks incurred from direct loan outstanding of the Fund shall be comprised of: Adjustments in debt repayment term/debt owed; Debt rescheduling; Debt charge-off; Outstanding interest write-off; Outstanding principal write-off; Debt sale; Disposal of property put up as security for borrowed funds; Other risk treatment measures prescribed by law.

Risk treatment approaches to indirect loan outstanding shall be subject to regulations adopted by the State Bank of Vietnam on risk treatment approaches to credit operations.