What are the regulations on the application requirements and procedures for financing for small and medium enterprise development fund in Vietnam? – Ngoc Huyen (Long An, Vietnam)
Article table of contents
Application requirements and procedures for financing for small and medium enterprise development fund in Vietnam (Internet image)
1. What is financing?
According to Clause 5, Article 4 of Decree 39/2019/ND-CP, financing refers to the situation in which the Fund gives its capital as a sponsorship and carries out activities in support of enhancing the capability of small and medium enterprises.
In particular, small and medium enterprise development fund is an out-of-budget state financial fund operating for not-for-profit purposes which is established by the Prime Minister under Clause 1, Article 2 of Decree 39/2019/ND-CP
2. Small and medium enterprise development fund’s financing principles in Vietnam
According to Article 28 of Decree 39/2019/ND-CP, the small and medium enterprise development fund’s financing principles are as follows:
- The Fund shall partially finance construction of facilities and purchase of machinery and equipment for use in production and business plans or projects of small and medium enterprises that meet requirements defined in clause 1 of Article 29 of Decree 39/2019/ND-CP.
- The financing currency unit must be Vietnamese dong.
3. Financing requirements and rate of small and medium enterprise development fund in Vietnam
Financing requirements and rate of small and medium enterprise development fund according to Article 29 of Decree 39/2019/ND-CP are as follows:
* Small and medium enterprise shall be eligible for the Fund's consideration and decision to approve financing when meeting requirements set out in point a, b and c of clause 1 or point a and b of clause 2 or point a and b of clause 3 of Article 16 of Decree 39/2019/ND-CP.
(1) Small and medium enterprises running innovative startups shall be entitled to loans granted by the Fund provided that they meet the following requirements:
- Meet regulations set forth in Article 4 in the Law on Support for Small and Medium Enterprises:
+ An SME is either a micro-enterprise, small enterprise or medium-sized enterprise having the annual average number of employees who participate in social insurance is not greater than 200 and satisfying one of the following criteria:
++ The total capital is not greater than 100 billion dong;
++ The enterprise’s revenue of the previous year is not greater than 300 billion dong;
+ Micro-, small and medium-sized enterprises are identified according to each industry such as agriculture, forestry, aquaculture; industry and construction and trade and services.
- Have feasible production and business projects and plans, exploit intellectual property assets prescribed in the Intellectual Property Law or new technologies prescribed in the Law on Technology Transfer or new business models according to regulations of law;
- 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;
(2) Small and medium enterprises participating in inter-sectoral complexes shall be entitled to loans extended by the Fund when meeting the following requirements:
- Meet regulations set forth in Article 4 in the Law on Support for Small and Medium Enterprises:
+ An SME is either a micro-enterprise, small enterprise or medium-sized enterprise having the annual average number of employees who participate in social insurance is not greater than 200 and satisfying one of the following criteria:
++ The total capital is not greater than 100 billion dong;
++ The enterprise’s revenue of the previous year is not greater than 300 billion dong;
+ Micro-, small and medium-sized enterprises are identified according to each industry such as agriculture, forestry, aquaculture; industry and construction and trade and services.
+ 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;
+ Meet regulations on loan guarantee laid down herein.
- Have feasible production and business projects or plans, locate their offices within geographical areas of inter-sectoral complexes and have cooperation or business contracts with other enterprises in these inter-sectoral complexes or jointly build and use regional brands.
Identification of inter-sectoral complexes shall be subject to provisions enshrined in the Law on Support for Small and Medium Enterprises and other documents giving instructions on implementation thereof.
(3) Small and medium enterprises participating in value chains shall be entitled to loans extended by the Fund when meeting the following requirements:
- Meet regulations set forth in Article 4 in the Law on Support for Small and Medium Enterprises:
+ An SME is either a micro-enterprise, small enterprise or medium-sized enterprise having the annual average number of employees who participate in social insurance is not greater than 200 and satisfying one of the following criteria:
++ The total capital is not greater than 100 billion dong;
++ The enterprise’s revenue of the previous year is not greater than 300 billion dong;
+ Micro-, small and medium-sized enterprises are identified according to each industry such as agriculture, forestry, aquaculture; industry and construction and trade and services.
+ 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;
+ Meet regulations on loan guarantee laid down herein.
- Have production and business projects or plans that are feasible and are put to use to directly create the additional value of products in these value chains, or have cooperation and business contracts with enterprises directly creating the additional value of products in these value chains.
Identification of value chains shall be subject to regulations laid down in the Law on Support for Small and Medium Enterprises and other relevant documents providing instructions on implementation thereof.
* The maximum financing rate shall be 01 billion dong per each production and business plan or project, but not exceeding 50% of total investment in construction of workshops and purchase of machinery and equipment.
4. Application requirements and procedures for financing for small and medium enterprise development fund in Vietnam
Application requirements and procedures for financing for small and medium enterprise development fund according to Article 30 of Decree 39/2019/ND-CP are as follows:
- Application documentation for financing shall be composed of the followings:
+ Application form for financing submitted from small and medium enterprises;
+ Dossiers on production and business plans and projects of small and medium enterprises, other documents evidencing that enterprises meet financing requirements prescribed in clause 1 of Article 29 herein.
- Small and medium enterprises shall submit the application package for financing at the Fund’s main office or by post.
- The Fund shall receive and verify the adequacy of application documentation for financing; assess the feasibility of production and business plan or project and other financing requirements prescribed herein; issue a decision on approval of financing and inform requesting small and medium enterprises in writing.
In case of refusal of financing, the Fund shall inform the requesting enterprise with clear reasons for such refusal.
- The Fun shall be responsible for issuing verification and assessment procedures, making a decision on whether application for financing is accepted, disbursing financing capital according to the principles of clear distinction of responsibilities and obligations of individuals or organizations involved in the process of verification, assessment and grant of the financing decision and disbursement of financing capital.
- The Fund shall establish a review committee to consider granting decisions on approval of financing. The Members' Board of the Fund shall decide the organizational structure of the review committee.
- The Fund shall have the right to hire independent consultant or establish the financing advisory group composed of scientists, administrators and/or experts with proper specializations to give their counsels on financing.
Quoc Dat
