Sci-tech firms finding it hard to borrow

Mai Quoc An, director of European Science Technology Co., Ltd. based in Ho Chi Minh City, revealed that his company has engaged in producing bricks leveraging sci-tech for 12 years.

In 2016, the company (Euroteco) had one science-technology initiative honoured as a patent with exclusive copyright protection for 20 years.

Its brick products met standards under three national strategies on digital transformation, green growth and science-technology development.

Despite all this, on entering their 13th year of development, Euroteco still could not borrow.

An said that though existing regulations provide clear guidance about supporting capital provision to science and technology firms, working with banks to borrow has been so bumpy as each bank, or even each bank branch, perceives regulations in a different way.

“There are hundreds of state instructions in the Law on Science and Technology, and the Law on Technology Transfer, but banks still refuse to lend, arguing that they dare not violate regulations. Banks may follow sub-law documents, but they need to first obey the law,” said An.

Accordingly, in light of the Law on Science and Technology, if businesses have made science and technology products, they will be entitled to many incentives such as low interest rates, trade support, land allocation or tax exemption.

In fact, many such firms have not received these incentives.

“We face many restrictions. For instance, a bank branch agreed to lend us. By that time, our company wanted to borrow about $87,000, and had a house valued at $108,700 to put up as a collateral at the bank. However, as the loans given to science-technology firms have low interest rates, the branch just valued the house as our collateral at $10,000. We finally had to sell the house to offset the capital need,” An said.

In another case, Nguyen Thuong Quan, founder and CEO of Sao Nam Integrated Technology JSC, said that although his company has posted stable profit growth and good money stream, they have encountered many hardships about capital sources due to interest rates staying high.

As the company grows, Sao Nam has received projects bigger in size with higher capital demands. This has driven Quan and his business into a dilemma in finding capital sources.

A southern business executive said that they asked for a loan through the Science and Technology Development Fund. The bank reported that to receive the loan, the company needed to sign a contract on financial consultation with a cost equal to 3 per cent of the loan value.

“This is a significant amount. Assuming that I need to borrow $1 million. The 3 per cent fee equals about $30,400, plus the need to sign a sample contract which costs nearly $2,200. Amid the current capital drain, how could business grow bearing such big sums,” said the company representative.

When waiting for the central bank (SBV), commercial lenders, and management at different levels present solutions, many science and technology firms have been to get rid of difficulties themselves.

Quan at Sao Nam JSC said that they have resorted to driving down administrative and manpower costs, just maintaining minimal cost to hold up operation.

In addition, before embracing any project, Quan and his team carefully assess the risk facet to avoid massive investment with low efficiency.

With Euroteco, An said that the company has been lucky to be able to self-manage their capital sources thanks to good products.

“Our products are lighter, more affordable in price, yet also more durable compared to many similar items in the marketplace so that many customers willingly accept bigger transportation cost to procure our products,” said An.

However, he noted that it urgently needs joint efforts from the central bank, local government and sectors to troubleshoot the capital bottlenecks for long-term development of sci-tech businesses.

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