Nguyen Hieu Thao, the owner of the IFresh backpack and bag business, said that she would close 2 out of her 4 stores located in big shopping centers in Ho Chi Minh City, accompanied by a halving of the workforce. “Sales have decreased by 85% while the costs remain the same.
With this situation, the losses are extremely severe and intense. My friends are closing a lot of their shops too, so it can be said that small and medium enterprises are currently facing an extremely difficult situation,” IFresh's owner said.
So far, small and medium-sized enterprises have had difficulty accessing bank capital. In the context of the increasingly complicated Covid-19 pandemic, it is even more difficult when the supply and social demand are both declining. “Small and medium-sized enterprises are the most vulnerable group among business groups because their capital is limited and their cash flow is not enough to prepare for a long period of interruption of business.”, Dao Gia Hung, Deputy Director of SME Division of VPBank, commented.
A recent VIB estimate says the bank now has nearly 6,500 customers affected by the Covid-19 epidemic, including about 86 large and medium-sized enterprises, while the rest are microenterprises and individual customers. Meanwhile, Dr. Can Van Luc, a financial expert, also said that the most important issue for businesses now is liquidity support.
A survey by the Private Economic Development Board also shows that the urgent need now is to have measures to support liquidity such as increasing cash inflows (borrowing at preferential interest rates) or reducing outgoing money (taxes, fees, interest, insurance payment extension or refund, etc.). Because of that, recent policies, such as the draft of the Ministry of Finance recently planning to extend the time for tax payment, insurance delay to 5 months, along with other support with an estimated scale of 30,100 billion VND, are being expected by small businesses.
According to Circular 01 issued by the State Bank, banks are proactive in rescuing businesses and people affected by Covid-19. Accordingly, the proposed plans include debt restructuring, interest and fee exemptions, loan group maintenance and new loans.
Before that, banks made pledges to disburse up to 250,000 billion VND with preferential lending rates. The size may increase in accordance with the bank's commitments and the actual lending situation. However, access to bank capital flows for small and medium enterprises is still a question mark when looking at past examples.
Liquidity, cash flow, or "capital buffer" is a factor that helps businesses overcome difficulties soon. This is certainly something that Vietnamese small and medium enterprises are still lacking. “According to the observation, large businesses have gone bankrupt during the economic downturns in the past two decades mainly because of weak financial management.
The key to financial management is to always reserve a source of reserve capital instead of pursuing profit-maximizing methods, promoting capital mobilization for investment, and business development with high leverage ratio”, Dinh The Hien, financial expert commented. Entering each crisis, large enterprises are "rescued" by the banks, perhaps because of the relationship between the two parties, which have made great contributions to each other's business results.
In the context of limited resources, as banks choose to rescue large businesses, it is obvious that the ability to save small businesses will decrease. In the past, there have also been packages of aid that came to the wrong address and into inefficient areas.
In the newly issued Circular 01, in addition to leaving the mechanism open for banks to be active with debts that are likely to become bad debts, the regulator also requires credit institutions to ensure that the aid will support the right beneficiaries.
However, there is one advantage is that for many years now, the asset structure of commercial banks has also changed. Accordingly, the proportion of outstanding loans, products, and services for individuals, small, medium and micro enterprises have also increased significantly.
In addition, banks themselves are having more incentive to keep the bad debt because Covid-19 is still directly affecting the business results. With the legal "unleash" in Circular 01, small and medium enterprises can expect that the bank will have to find ways to "save themselves and others".
In the case of IFresh, in early February, the bank supported the disbursement of a mortgage loan for this party after a thorough review of the paperwork. "This is a small amount but very important at the moment. The bank also has a plan for the next working session," Thao said. Banks have been actively solving bad debts caused by the Covid-19 virus since before the management agency issued the official support policy.
The data collected on 4th March shows that there have been more than 44,000 customers with outstanding loans of 222,000 billion VND (debt repayment structure, interest rate, and fee waiver, ...), equivalent to approximately 24% of the total outstanding loan estimated to be damaged.
At the recent meeting on 12th March, Prime Minister Nguyen Xuan Phuc said that it was likely that the government would have a comprehensive business support program. This program includes a scenario of a post-pandemic recovery program, overall coverage of taxes, fees and insurance in industries and sectors heavily affected by Covid-19.
However, not to mention the rescue on a larger scale (which large businesses will surely benefit from more), small businesses also need to survive the Covid-19 phase before thinking about other things.
Moreover, after receiving the “painkillers”, business owners also need to think more about the capital padding, which is the dose of vaccine needed for the long-term future.
>> Thousands of businesses left the market due to Covid-19