The biggest concern of business households is the lack of capital, because it is known that borrowing from banks is not easy. Small-scale enterprises are small-scale enterprises that directly contribute to economic growth. In particular, comparison shows that the business economy achieves the most effective use of capital to generate income and direct income. Many questions have been sent to Viet My Law and Accounting Company, including Can business households borrow capital from banks? To get the answer, please refer to the article below.

1. Legal definition of business households

According to current regulations, the Law on Enterprises does not have a specific definition of Business Households. But this definition is mentioned in Decree 01/2021/ND-CP. According to Clause 1, Article 79 of Decree 01/2021/ND-CP, it is explained that: “A business household is registered by an individual or household members and is responsible for all of its assets for the business activities of the household. In case household members register a business household, they shall authorize one member to act as the representative of the business household. The individual registering the business household, the person authorized by the household members to act as the representative of the business household is the business household owner.“

A small note is that any business household that employs ten (10) or more employees must register to establish an enterprise in accordance with the law.

A set of documents to register a business household includes the following basic documents:

• 01 Application for business household registration;
• Prepare some legal documents of the business household owner or documents of the household members registering the business household in case household members register the business household;
• 01 Minutes of the meeting of household members recording the establishment of a business household when household members register for a business household (provide a certified copy)
• Authorization letter from a household member agreeing to allow one member to be the owner of the business household in the case of household members registering for a business household.

2. Can business households borrow capital from banks?

Lack of capital is a major concern for the business economy in general because borrowing capital from a bank is not easy. Many small and medium-sized enterprises complain that they have a lot of difficulties in borrowing capital from banks because of complicated procedures and documents. The question many people ask is: Can a business household borrow capital from a bank? The answer is yes.

In Clause 3, Article 2 of Circular 39/2016/TT-NHNN of the State Bank, there are regulations on lending activities of credit institutions (CIs) and branches of foreign banks to customers, customers borrowing capital from credit institutions including:

– First, it must be a legal entity and this legal entity must be established and operating in Vietnam. It can also be a legal entity established abroad but operating legally in Vietnam;

– Second, it is an individual with Vietnamese nationality or an individual with foreign nationality.

According to regulations, a business household is not a legal entity, so a business household should not be the first subject to be granted loans by credit institutions. In order to be able to borrow capital from banks, individuals and households doing business in the form of a business household will borrow as an individual business household owner.

When an individual (here, the individual business owner) needs to borrow capital from a bank, he/she must meet a number of loan conditions as prescribed in Article 7 of Circular 39/2016/TT-NHNN. Only when these conditions are met will the Bank consider and decide to lend capital. Specifically:

– The individual who is the head of the business household must have full civil capacity as prescribed

– The individual who is the head of the business household needs to borrow capital for legal purposes.

– The individual who is the head of the business household must have a feasible capital use plan.

– The individual who is the head of the business household must have the financial capacity to repay the debt.

3. Procedures for borrowing capital from banks for business households

During peak periods, the capital needs of the business economy are very large but are not met in a timely manner, leading to missed opportunities. Banks do not really complicate things for customers, but without the necessary documents or restrictions, banks will face great risks if customers cannot repay their debts. To solve the difficulties of business households, many banks have many loan packages specifically for businesses with criteria of quick processing, no need to borrow assets to minimize the time to finance business households, and competitive interest rates.

Individual business owners to borrow capital from banks need to follow these simple steps:

+ First: Choose a reputable bank or credit institution from which you want to borrow capital. Then go to the bank to carry out this procedure

+ Second: When you go to the bank, clearly state your needs to be advised on the most preferential loan packages that suit your borrowing needs

+ Third: Carry out the procedures according to the instructions of the bank staff to ensure the correct process and the fastest disbursement

+ Fourth: The bank will review the documents and papers provided by the customer and decide whether to grant the loan or not

+ Fifth: Proceed to disburse to the customer

4. What documents are required to convert a business household into a private enterprise?

According to the provisions of Article 21 of Decree 01/2021/ND-CP, it is stipulated that:

Business registration dossier for private enterprises

1. Application for business registration.

2. Copies of legal documents of individuals for private business owners.”

Pursuant to Article 27 of Decree 01/2021/ND-CP, it is stipulated that:

Registration of conversion from a business household into an enterprise

1. Registration of establishment of an enterprise on the basis of conversion from a business household shall be carried out at the Business Registration Office where the enterprise intends to locate its head office.

2. The dossier for registration of establishment of an enterprise on the basis of conversion from a business household shall include the original Certificate of Business Registration, a copy of the Tax Registration Certificate and the documents specified in Articles 21, 22, 23 and 24 of this Decree corresponding to each type of enterprise, which does not include the Investment Registration Certificate specified in Point b, Clause 4, Article 22, Point c, Clause 4, Article 23, Point c, Clause 3, Article 24 of this Decree. In case an enterprise is converted from a business household with foreign investors, organizations In case a foreign-invested economic organization participates in contributing capital, purchasing shares, or purchasing capital contributions and is required to carry out procedures for registering capital contribution, purchasing shares, or purchasing capital contributions according to the provisions of the Investment Law, the dossier must include a document from the Investment Registration Agency approving the capital contribution, purchasing shares, or purchasing capital contributions of foreign investors or foreign-invested economic organizations. 3. Within 02 working days from the date of issuance of the Certificate of Business Registration, the Business Registration Office shall send a copy of the Certificate of Business Registration and the original Certificate of Business Household Registration to the District-level Business Registration Office where the business household is headquartered to terminate the business household’s operations.”

Based on the above regulations, the dossier for converting a sole proprietorship into an enterprise includes:

– Original copy of the certificate of business household registration;

– Valid copy of the tax registration certificate;

– Company charter;

– Application for business registration;

– List of members (for LLCs with two or more members, partnerships) or list of founding shareholders (for joint stock companies);

– In case the capital contributing member to establish the company is an organization, it is necessary to supplement: Valid copy of the establishment decision, business registration certificate, other equivalent documents of the organization;

– Valid copy ID card/citizen identification/passport of the legal representative, members, shareholders;

– Power of attorney for the person submitting the application (if the legal representative does not directly submit the application);

– Valid copy of ID card/citizen identification/passport of the authorized person.

Business owners can submit the application for transfer from an individual business household to a private enterprise in 2 ways as follows:

Method 1: Submit the application directly at the one-stop department of the Business Registration Office under the Department of Planning and Investment where the enterprise is headquartered.

Method 2: Register online at the National Business Registration Information Portal with a public digital signature or use a business registration account (for Hanoi and Ho Chi Minh City, online registration is required).

Today, financial companies and credit institutions have developed many products to manage loans of commercial organizations. Business owners should choose the most popular form of loan for their business operations. We hope the above information will help answer your questions about can business households borrow capital from banks? Please follow other articles of VIET MY LAW AND ACCOUNTING to learn more about accounting and law.