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Friday, July 26, 2024

Many firms may hold out for short time due to diminished cash flows

The Saigon Times

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HCMC – Up to 86.4% of enterprises that participated in a recent survey said that they had suspended their operations due to Covid-19 and they could hold out for just one to three more months as their cash flows had been exhausted.

According to the results of the survey, jointly conducted by the Government-run Private Sector Development Committee and news site VnExpress, on laborers’ jobs and incomes and enterprises’ financial health amid the pandemic, many enterprises are facing a shortage of cash flows to cover costs.

Specifically, nearly 40% of the respondents said they had suspended their operations and could exist for less than one month. This is also the period that 17.7% of operational enterprises can maintain their operations.

The survey of 21,500 enterprises and household businesses showed that household businesses have been the most vulnerable with 45% of them saying they could stay afloat for less than a month. The rate was 39.5% for private firms, limited companies and Vietnamese joint stock companies, 30% for State-owned enterprises and 23.5% for foreign-invested firms.

Thus, if enterprises halt their operations for another month without any support, they would be on the verge of bankruptcy. September will be the decisive time to save them.

According to over 71% of both suspended and operational enterprises, the biggest difficulty is paying the salaries of employees.

They also found it difficult to pay the bank loan principal and interest; land, warehouse and office rentals; health, social and unemployment insurance premiums and labor union fees.

To deal with these difficulties, 64% of the respondents have cut their operating costs by reducing the head count and payroll, and restructuring their operations.

As for support policies, 62% of suspended enterprises proposed borrowing loans with an interest rate of 1%-3% to pay the salaries of their employees as they have to retain employees for the recovery of production, while the employment cost remains high.

Meanwhile, 55% of operational enterprises agreed with the proposal.

They have been under high pressure with regard to costs, especially costs to maintain the stay-at-work mode, while their operation capacity has been much lower than that during normal periods.

To address the exhausted cash flow issue, it is essential to access capital. However, many firms have found it hard to access the Government’s relief aid.

Many have to borrow loans from banks, individuals and financial organizations.

By Dung Nguyen

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