On April 26, 2024, the Government issued Decree No. 45/2024/ND-CP ("Decree 45") amending and supplementing certain provisions of Decree No. 39/2019/ND-CP regarding the organization and operation of the Small and Medium Enterprise Development Fund ("the Fund") ("Decree 39"). Below are some notable points in Decree 45:
1. Introduction of the Principle of Maintaining Only One Loan at a Time and One-time Funding for SMEs:
1.1. Lending Principles for SMEs:
Previously, Decree 39 outlined three direct lending principles of the Fund for SMEs as follows:
- The Fund’s lending activities are carried out in accordance with agreements between the Fund and SMEs, in compliance with regulations;
- SMEs borrowing from the Fund must ensure that the loan is used for the intended purpose and that both the principal and interest are fully and timely repaid as agreed with the Fund;
- The currency for loans and repayments is the Vietnamese Dong.
In addition to these three principles, Decree 45 has added a new principle that SMEs borrowing from the Fund must fully repay both the principal and interest on time as agreed (except in cases of force majeure) before being eligible for further loans from the Fund. This means that at any given time, an SME can only maintain one loan and can only continue to borrow from the Fund if it complies with the agreed repayment terms.
This principle aims to restrict businesses from spreading their loans across multiple projects or business plans simultaneously and provides a basis to evaluate the effectiveness, capability, and real capital needs of these enterprises.
1.2. Funding Principles for SMEs:
Under Decree 39, SMEs could receive partial funding from the Fund for investment in building factories and purchasing equipment for projects or business plans if they met specified conditions.
Decree 45 limits each SME to receive funding from the Fund only once. This measure is intended to tighten funding activities, requiring and encouraging SMEs to use the provided capital more effectively.
2. Stricter Loan Conditions for SMEs
2.1. For Innovative Start-up SMEs:
In addition to existing conditions, innovative start-up SMEs must ensure that their project or business plan is feasible and aligns with the criteria for defining innovative start-up small and medium enterprises as per regulations.
2.2. For SMEs participating in industry clusters or value chains:
- Participation in industry clusters or value chains as regulated;
- Having a feasible project or business plan within the industry sector of the cluster or having products within the value chain;
- Ensuring that own capital involved in the project or business plan is at least 20% of the total investment required to implement the project or business plan, and having adequate capital to execute the project or business plan;
- Complying with regulations regarding loan guarantees.
This Decree takes effect on June 10, 2024.
Projects or business plans of SMEs that have been approved for funding or direct loans by the Fund or for indirect loan transfers to banks before Decree 45 comes into effect will continue to be governed by the old regulations.
Comment: