Vietnamese companies, especially small and medium enterprises, are reportedly exposed to huge challenges in occupying domestic market share after the country joined the World Trade Organisation (WTO) and opened the economy for foreign investors.
Currently, the main capital sources of a Vietnamese company are equity and bank loans. However, regulations on capital mobilisation and bank loans concerning mortgages, corporate size and reputation are the main hindrance to accessing these capital sources. Financial leasing has emerged as an alternative solution for small and medium enterprises.
To create a trademark and a place on the market, an enterprise has to improve productivity to enhance competitiveness and affirm its position on the market by renovating equipment and technology. To do this, the enterprise has to seek and use other sources of capital.
In 1996, financial leasing debuted in the Vietnamese market as a new channel for companies to mobilise capital. So far, the central region has only two financial leasing firms, Agribank Leasing and Sacombank Leasing.
Intrinsically, financial leasing is a medium and long-term credit form under which the lessor sponsors a certain proportion of capital based on the assets of the lessee, the amount can reach 90 per cent of asset value and contract term depends on mutual agreement. Leased and purchased assets are machinery, equipment, transport means and other movables. The enterprise can choose the supplier or hire a consultant to choose leased assets. At the maturity of the financial leasing contract, the company has the right to buy back the assets at the nomination price agreed in the contract. The recipients of assets do not have to pay taxes for the transfer.
Ho Thi Kim Nga, Director of Sacombank Danang, said “Compared with other channels of capital mobilization such as bank loans, share issuance or investment funds, financial leasing has outstanding advantages. For example, the financial lessee can be any company, not only famous ones, and does not have to share power with new shareholders or show mortgages.”
The procedure for financial leasing is also very simple. However, the interest rate of financial leasing is high, but it is adjustable for good clients and big projects.
Another model of financial leasing is operating leasing. Compared with financial leasing, operating leasing is quite different. For example, there is no transference of ownership rights over the assets at the end of leasing, the lessor cannot require the assets to be repurchased, the time of asset usage is shorter and the leasing fees do not need to be higher or equal to that of financial leasing.
At the same time, most companies in the central region have small and medium business size and they do not possess a competitive advantage. Financial leasing is the ideal and favourable channel for central companies to access capital sources to expand investment and markets.
Q.D
Vietnamese
