Borrowing capital for small businesses is a form of capital mobilization that is no longer strange. However, finding enough capital for business is always a challenge for business owners. Borrowing capital for business is a popular solution that many people choose to start their business plan. However, is borrowing capital for business the right choice? And what are the necessary conditions and procedures for borrowing capital for small businesses?

1. Concept of borrowing capital for small businesses?

Borrowing capital for small businesses is a form that helps business owners mobilize capital for business activities from the beginning or during the process of expanding their business. To get a loan from a bank for small businesses, businesses or individuals need assets to secure the loan. The bank will consider and decide on the loan amount based on the collateral. Currently, banks offer a variety of loan packages to meet the business needs of customers.

2. Benefits of borrowing capital for small businesses

Borrowing capital from a bank for small businesses brings the following benefits:

• Quickly obtain a reliable source of capital to develop business activities.
• Can mortgage assets up to 80% of the value if there is collateral such as real estate.
• No business license is required to borrow capital.
• Flexible loan terms from 3.5 to a maximum of 10 years, helping to reduce financial pressure for customers.
• Diverse loan forms and products to meet customer needs.

3. Popular forms of loans for small businesses today

Today, there are many forms of loans for small businesses, so customers need to consider their needs to choose the appropriate form. Below are three popular forms that Viet My Law and Accounting would like to share:

3.1. Mortgage loans

Mortgage loans are a traditional, popular and familiar form of loan to many people. The condition for borrowing is that the business owner must have assets that can be used as collateral. Typically, the loan amount will be equal to 80% of the value of that asset. This form of loan is often applied to small business owners who own valuable assets. There are advantages to mortgage loans, including long loan terms (up to 25 years) and low interest rates.

3.2. Unsecured loans

Unlike mortgage loans, unsecured loans are a form of loan that does not require collateral but is entirely based on personal reputation to assess the ability to repay the debt. This form of small business loan is chosen by many households. The loan limit of this form is often higher, up to 300 million VND. The repayment period lasts up to 36 months, depending on the regulations of each bank. Unsecured loans are considered suitable for small business owners, because they do not require the ownership of valuable assets, and the loan amount is suitable for their capital needs and business scale.

3.3. Overdraft loans

This is a form of loan used to quickly meet the urgent capital needs of small businesses. Based on the reputation and credit history of the business, the bank can exceed the actual amount in the account to set a loan limit. The advantage of this form of loan is that the interest rate is only calculated on the amount of spending exceeding the actual amount.

For example: If the business’s current payment account has 50 million VND, when taking out an overdraft based on this account, the bank can allow spending up to 150 million VND. However, if the customer only uses 70 million VND, the bank will only charge interest on this amount.

4. Conditions for small business loans

To be able to borrow money for small business, customers need to fully meet the following conditions:

• Be a Vietnamese citizen.
• Be between 18 and 75 years old.
• Must have a business license. In case there is no business license, customers need to provide actual images of the business establishment.
• Must have collateral when borrowing with a large limit at the bank.
• Have a stable income and the ability to repay the debt in full.
• Clear and legal purpose of the loan.
• Current residence must have a branch or transaction office of the bank that wants to borrow capital.

5. Documents to prepare before borrowing capital for small businesses

To borrow capital for small businesses, you need to prepare a file including the following documents:

• Photos and personal records
• Business premises lease contract
• Copy of ID card/CCCD of business representative or owner
• Household registration, temporary residence card and electricity and water bill
• Business registration certificate, tax code, insurance contract, payroll, etc.
• Documents certifying ownership of collateral (if any)
• Loan application.

6. Small business loan process

To apply for a small business loan at a bank, you need to prepare a complete application and follow these steps:

6.1. Prepare documents

Customers need to prepare a complete small business loan application according to the bank’s regulations so that the application review process can be done quickly. The loan application must include the following documents:

• Loan application (according to the bank’s form).
• ID card / Passport / Citizen ID card.
• Personal business license or photo of the business establishment.
• A plan on the purpose of using the capital.
• Documents related to collateral.
• Debt repayment plan.

6.2. Appraisal of small business loan application

Upon receiving the application, the bank will conduct an appraisal by reviewing the customer’s credit history and credit score. As well as an actual assessment of the residential/business location to value the mortgaged property. Through this process, the bank will determine the financial capacity and payment ability of the customer, as well as assess the value of the property that the customer mortgages.

6.3. Approval and disbursement

Upon completion of the appraisal process, the bank staff will prepare a credit proposal report and request approval from the competent authority. Once the loan is approved, the bank will disburse the loan.

7. Notes when borrowing capital for small businesses

Here are some important notes when borrowing capital for small businesses that households and businesses need to be aware of.

• Carefully understand the terms and conditions of the loan: Before signing the loan contract, make sure you understand the interest rate, maximum loan amount, repayment period and other conditions.
• Assess your ability to pay: Make sure you have the ability to repay your loan on time without affecting your personal or business finances.
• Consider collateral options: If necessary, consider mortgaging your property to secure a more attractive loan and interest rate.
• Compare offers from banks: Don’t agree to a loan from the first bank you come across. Compare offers, interest rates and terms from different financial sources before making a decision.
• Seek professional advice: If necessary, seek advice from a financial expert or lawyer to ensure that your loan decision is smart and in the best interest of your business.

8. Small business loan service at Viet My Law and Accounting

Viet My Law and Accounting provides small business loan services to support businesses and individuals in need of capital. We are committed to providing flexible, suitable and convenient loan packages, helping customers access capital easily and effectively.

Features of small business loan services at Viet My Law and Accounting include:

• Diverse loan forms: We provide flexible loan forms such as unsecured loans, asset mortgage loans, commercial credit loans, suitable for the needs and payment capacity of each customer.
• Simple procedures: We optimize loan procedures, minimizing the time and effort that customers have to spend to complete the loan process.
• Competitive interest rates: Viet My Law and Accounting is committed to providing competitive interest rates and reasonable loan conditions, helping customers save costs and maximize benefits from loan capital.
• Professional consulting support: Our team of consultants is ready to assist customers in choosing the most suitable loan package, providing information and detailed advice on loan terms and conditions.
• Customer service: Viet My Law and Accounting is committed to bringing the best loan service experience to customers, always listening and meeting all their needs during the loan process and afterwards.

Small business loans can bring many benefits to small traders. To make the right decision, you need to carefully understand the forms and conditions of loans. Contact VIET MY LAW AND ACCOUNTING, so we can help you find the best solution!