Lending to household businesses as usual
HCMC - Individuals in search of loans for family-run business and production activities, if meeting the conditions set out by banks, can get credit without having to upgrade their operations into firms as required by new legislation, the central bank said.
In line with the 2015 Civil Code that stipulates participants in civil relations are legal entities and individuals only, Circular 39/2016/TT-NHNN specifies that borrowers from credit institutions are legal entities and individuals, says the website of the central bank.
In other words, those who are not legal entities (households and cooperatives) are not eligible for bank loans. In case they are in need of loans for business activities, individuals may take out loans to meet the capital requirements of their own, of the business households, the production establishments or the private companies which they own.
Talking to the Daily, the deputy general director of a HCMC-based bank that has launched several credit packages for traders at markets remarked the provisions of Circular 39 clearly defined the borrowers: individuals and legal entities. This does not make any difference from before, with just more specific words written on paper added.
“So far, we have been lending to traders at markets as individuals, not as household businesses or organizations. It is because household businesses are a virtual name, whereas a specific person must assume the responsibility,” he said.
Individuals can still get loans for production and business. Depending on the value of the loan, collateral may vary, he noted.
As for interest rates, this is an economic relationship between the lender and the borrower, he noted.
Loans for corporate clients do not necessarily enjoy a lower interest rate than individuals. Interest rates depend on banks, market demand, risk or loan size.
Hoang Thi Van, owner of a stone jewelry manufacturing facility in HCMC’s District 12, said she borrowed VND100 million from a bank a year ago for production.
This loan was borrowed as a personal loan, not one for a household, with Van’s house used as collateral. The interest rate for the purpose of production is lower than that for business and even lower than consumption.
Lawyer Truong Thanh Duc, chairman of Basico Law Firm, said households, household businesses or cooperatives are a virtual entity, essentially an individual or a group of ones, which has been removed from the 2015 Civil Code.
It is a right move that Circular 39 excludes “households” from the list of borrowers, Duc said. This is just a change of form, while the essence remains the same.
Households and household businesses shall operate as one or several individuals, with their owners no longer the default representatives.