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Tuesday, July 5, 2022

Small businesses struggle with rising costs, limited access to capital

By Dung Nguyen

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HCMC – Many small businesses are struggling with limited access to capital and rising costs after resuming their operations in a new normal, said speakers at a seminar themed “Rising inflation, where to find capital?”

At the seminar, held on December 2 by the Saigon Times Group in collaboration with Viet Capital Bank, the speakers said businesses are recovering quickly but still facing challenges that need to be addressed.

Rising costs, limited access to capital

Pham Van Viet, vice chairman of the HCMC Association of Garments, Textiles, Embroidery and Knitting (Agtek), said that over the past two months, manufacturing enterprises have focused on completing backlogs caused by social distancing and have begun to manufacture for orders in 2022. However, they are facing difficulties as their inventory of materials amounted to some 50% and their capacity reached 50-60%.

According to Viet, large businesses are able to manage their cash flow but small companies are finding it hard to access capital for their production.

“The lending criteria of banks stay unchanged, while the businesses’ operation costs have soared. They also face an inventory of materials and rising costs. If banks maintain criteria such as collateral, profits, revenues and pre-feasibility plans, it will be hard for small businesses to access capital,” he said.

Ngo Quang Phuc, chairman of the Saigon Times Real Estate Club, said real estate firms have also been struggling with rising costs.

According to Phuc, steel prices have surged 50-60%, so contractors have to work with investors to find solutions. The investors also have to adjust down the prices to attract customers.

Regarding inflation, Economics PhD Nguyen Hoang Bao from the University of Economics HCMC said inflation is still at a potential level and has not shown signs in the economy. The inflation rates of some products have increased but those of others have declined.

He forecast that inflation would rise significantly next year.

Rising demand for capital 

Nguyen Thanh Nhan, director of Corporate Clients at Viet Capital Bank, said businesses’ demand for capital is rising in December as they prepare for the year-end peak season and the upcoming Lunar New Year.

Nhan said banks are able to meet the businesses’ rising demand for capital. The State Bank of Vietnam has recently revised up the credit caps of some banks, including Viet Capital Bank, to meet the capital demand of businesses.

Pham Van Viet, vice chairman of Agtek, said clothing companies have had to restructure and restrict investment into fixed assets to manage their cash flow.

Viet suggested that banks continue to cut interest rates to help businesses overcome this difficult time.

Besides, banks and the Government should focus on long-term support rather than short-term policies. Any reduction or exemption of taxes and fees should also be extended until 2023.

Nhan of Viet Capital Bank said the bank would offer flexible lending criteria to provide businesses with better access to capital based on their condition.

Regarding the real estate sector, Phuc said the competent agencies should have more specific policies and encourage real estate companies to increase investment in low-cost homes for middle-income people.

Nguyen Hoang Bao said rescue packages would depend on the specific targets of the Government. If the Government wants to improve the competency of businesses in the long term, the stimulus packages should focus on digital transformation.

Besides, Bao said stimulus packages must be implemented properly to ensure effectiveness and avoid waste.

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