Banks decrease rates to revive business growth

Banks have slashed lending rates on the State Bank of Vietnam (SBV)'s orders, and businesses can now get loans at well below 10% – sometimes even at zero interest – compared to more than 20% in 2011.

Many also offer incentives to attract borrowers. HDBank, for instance, offers loans at zero interest for the first month.

The rate cut has eased the enormous pressure on costs companies faced until recently, a double-whammy considering the economic slump.

Nguyen Van Tan, director of the Thong Tan Food Company, said the lower cost of funding is helping revive businesses' confidence to sustain production or even expand.

But analysts said it is still not easy for companies, especially small-and medium-sized ones, to borrow because most did not have assets to put up as collateral.

To overcome this problem, they said banks should switch to lending based on revenues instead of assets.

It is a new form of lending based on a company's predictable or recurring revenues that does not require it to put up collateral.

By studying a company's cash flows and projections, banks would be able to clearly know the former's ability to repay, the analysts said.

The deputy director of a commercial bank in HCM City's Tan Binh District, who asked not to be named, said some banks including his have already switched to such unsecured loans.

"[But] banks would only do this when they know that their loan will be used effectively and for the right purpose and the company's revenues are adequate to repay the principal and interest. Our bank plans to use this method of lending to fully capitalise on its advantages to achieve the credit growth target for this year," he said.