Businesses struggling to arrange capital

Drawing up business plans for a new year has never been a difficult task for business managers unlike now when seeking capital is the biggest headache for them.

“If the interest rates for loans stay are high as they are, we will miss a lot of opportunities to develop,” said the director of a garment company.

Trying to save themselves before the government helps

Businesses say they are moving heaven and earth to seek capital for their 2011 business plan. Besides, they also have to take necessary measures to sustain themselves in this difficult period until the interest rates go down as predicted.

According to Pham Xuan Hong, General Director of Saigon 3 Garment Company, with high lending interest rates many businesses have had to cancel their plans on expanding production. Even though they want to expand production, they will not be able to fulfill the plans, because garment companies are lacking laborers.

Hong said that in order to overcome the capital difficulties, Saigon 3 negotiated with partners who provide materials and came to an agreement that the company will make deferred payments for materials.

“This will help ease the capital burden on the company. In return, as for big orders, the company will accept to reduce the sale prices for importers. The decreases will be approximately 3-5 percent,” Hong said, adding that with the measure, the enterprise will not have to pay interest, while it can “tie” the clients to the company.

Meanwhile, Nguyen Dang Hien, General Director of Bidrico, a drink producer, said that it is necessary to speed up the capital turnover. “As for top selling products, we will ask retailers to pay on delivery. Retailers will have to agree to pay immediately, because they need products to sell,” he said. “As for the products which are selling more slowly, we will allow clients to pay later”.

He said that the flexibility in implementing the pricing mechanism can also help bring capital to enterprises and help optimize profit. Besides, boosting sales and reducing stocks should also be seen as a method to speed up the capital turnover and not to avoid bank loans.

DQ Corporation is also pressing partners to allow the company to make deferred payment for materials. Besides, according to Doan Dinh Quoc, Chair of DQ Corporation, the company is calling shareholders to contribute capital to serve the company’s business plan in 2011 and help ease pressure from the bank loans.

It is also the right time for enterprises to cooperate and share difficulties. The director of a wooden furniture corporation said that he is sharing a big order with other enterprises. Previously, the company undertook all the phases of the production process. However, with the big order, the company will only undertake some phases, while the production of other parts of products will be carried out by other enterprises.

Where to find capital?

Wooden furniture corporations are rushing to import materials at this moment, because the prices have been forecast to increase in 20111. “We need capital to import materials, but the overly high interest rates are causing distress,” said Nguyen Van Hanh, Director of Minh Phuong Company. Meanwhile, the negotiations on raising sale prices with importers have been at a deadlock due to the debt crisis in Europe and the slow recovery of the US economy.

Many enterprises have decided to use financial leasing services instead of borrowing money from banks. With the service, enterprises do not have to mortgage their assets at banks for capital.

However, businesses say that this should be seen as a temporary solution which can help them survive the difficult period. “The interest rates enterprises have to pay for financial leasing are just a little lower than interest rates for bank loans, but enterprises still have to bear high interest rates and they have to face many risks,” Hanh said.- Thoi bao Kinh te Saigon