LOAN PROCEDURES FOR SMALL AND MEDIUM ENTERPRISES

1. Legal basis

- Enterprise Law 2020

- Circular 39/2016/TT-NHNN

2. Conditions for small and medium enterprises to get bank loans

– Provide documents proving that your company belongs to a small and medium enterprise

– The head of the enterprise must have more than 20% own capital in the total investment capital of the project or business method

– Ongoing projects must be positive to prove their ability to repay bank debts

– Meet the regulations on loans

– Must ensure sufficient capital to implement business projects

3. Small and medium enterprise loan procedures

1. Legal documents of the enterprise

In legal documents, businesses need to provide:

- Certificate of business registration/Certificate of business registration/License for establishment, operation, investment/Establishment license/Decision on establishment.

• Certificate of operation registration of a branch/representative office (if it is a branch)
• For enterprises doing business in conditional industries, it is necessary to provide additional certificates of eligibility for business, import and export licenses,... documents in accordance with current laws.

- Corporate charter

• Accept the charter posted on the website of the Stock Exchange in Hanoi/Ho Chi Minh.
• The latest updated charter and its amendments (if any)

- Citizen ID/Passport of the legal representative or authorized person to sign the credit file and related documents

• Provide the front and back of the latest sheets. Enterprises can provide additional identity card/old passport (if any)

- Register of capital-contributing members/List of members with contributed capital of 5% or more compared to the charter capital of the enterprise and have voting rights at the nearest time.

• In case the financial statements are clearly shown, the enterprise is a private enterprise or the owner is an individual, there is no need to provide a register.

- Minutes of meetings of the Board of Directors or members on borrowing capital at the bank.

• In case the enterprise is a 1-member limited liability company owned by an individual, the enterprise borrows capital in the form of credit, the State enterprise does not need to provide this document.

- Written authorization from the legal representative of the enterprise.

• This document is only needed when the person signing the loan contract is not the legal representative of the enterprise.

2. Financial records

Financial records are the basis for banks to evaluate business performance and affordability, both in terms of loans and interest. The documents businesses need to prepare include:

- Financial statements for the last 2 years

• Enterprises must have a balance sheet, business results statement.
• Enterprises with revenue of less than VND 16 billion only need to provide financial statements for 1 year
• For businesses operating for less than 2 years, enterprises provide financial statements suitable to their operating situation.
• In case the enterprise provides financial statements in the latest year, it can provide the financial statements of the nearest previous year.

- Tax returns for the last 4 quarters or 12 months.

• Allow 1 month late compared to the desired time to grant the credit line.
• For enterprises that do not pay taxes online, they must provide a hard copy certified by the tax authority.

- A summary book of some items in the most recent fiscal year

• The general book must contain receivables, payables, inventory and fixed assets
• For enterprises with revenue of less than VND 16 billion, there is no need to provide this book.
• For manufacturing and construction enterprises, it is necessary to provide fixed asset books.
• In the general book, there must be balances at the beginning of the period, at the end of the period and debts in the period.

- A summary book of short-term/long-term items of the latest fiscal year

• The book will show assets, loans and liabilities, payables to sellers, customer revenues, main ship investments.
• This book is only required for enterprises with abbreviated financial statements according to regulations of the Ministry of Finance.

3. Activity records

Documents proving the operation of the enterprise will need to prepare the following documents:

- Contracts with 3 of the 5 largest suppliers related to the business of the enterprise.

• In case the enterprise has a turnover of less than VND 16 billion, only 2 contracts are required.
• Businesses with small inputs and outputs, businesses can collect contracts/orders instead.
• Specific enterprises that cannot provide contracts can replace them with purchase orders.

- Contracts of 3 output customers out of the 5 largest output customers

• In case the enterprise has a turnover of less than VND 16 billion, only 2 contracts are required.
• Businesses with small outputs, enterprises can collect contracts/orders for replacement.
• Specific enterprises that cannot provide economic contracts, can replace them with purchase orders.

- Bank account statement

• The enterprise provides a statement of at least 12 months closest to the time of submitting the loan request.
• Statements must meet a minimum of 50% of tax revenue. For enterprises with revenue of less than VND 16 billion, they must meet 70%.
• Enterprises can provide up to 1 month later than the time of submitting a loan request.

- Recent progress of works

• Enterprises with revenue of less than VND 16 billion do not need to provide.
• This document is required for enterprises in the construction and installation industry, enterprises with the latest financial statements of VND 200-500 billion for the following industries: Shipbuilding, boats; real estate and infrastructure business; production and distribution of electricity and energy.

4. Collateral documents

With collateral documents, only required for enterprises to borrow capital in the form of mortgage. In procedures for borrowing loans from small and medium enterprises, enterprises need to prepare:

- Citizenship ID/passport of the collateral owner.

- Certificate of business registration in case the property owner is a legal entity.

- Dossier of certificate of ownership/use of assets.

• Pink book/real estate red book.
• Certificate of ownership of construction works (if any)
• Building permit (if applicable)
• Contract of sale or equivalent document.
• Vehicle registration and inspection/certification of technical safety and environmental protection (if any).
• Certificates of deposit/books/savings cards/deposit contracts/bonds/bills,...
• Invoices/payment documents/customs declarations,...

- Other property records (if any)

5. Loan documents

Enterprise loan dossiers need to provide the following documents:

- Application for credit in the form of the bank.

- Business plan and accompanying use of capital.

6. Other records

For specific business owners or businesses, it will be necessary to provide additional relevant documents according to the bank's regulations.

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For more information, please contact:

Hoang Pham (James) / Managing Partner at: hoang.pham@vselawyers.com

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Attention: This legal update is not an advice and should not be treated as such.