Vietnam is one of the countries with a developing economy, so small and medium enterprises are very developed. These small and medium enterprises have quite high capital requirements for this group. Financial companies and credit institutions are also interested in unsecured loan products to support these small individuals. Business households are a type of small business that directly contributes to economic growth. But this type of business does not easily borrow capital from banks, so lack of capital is their biggest problem. So what are the conditions for business households to borrow preferential capital from banks in 2024?

1. What is a business household? What are the characteristics of a business household?

A business household is a type chosen by many individuals because of its small, compact nature, suitable for small businesses. However, a business household is not a type of business.

1.1 Definition of a business household

The current Enterprise Law 2020 does not have a specific definition explaining what a business household is. However, this issue is explained in Decree 01/2021/ND-CP, specifically in Clause 1, Article 79 of Decree 01/2021/ND-CP, which stipulates on business households as follows:

1. A business household is registered by an individual or members of a household and is responsible for all of its assets for the business activities of the household. In case the members of a household 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 members of the household to act as the representative of the business household is the owner of the business household.

The competent authority to carry out the registration of a business household is the district-level business registration authority where the business household has its head office.

1.2 Some characteristics of business households

The first characteristic is that business households do not have legal status

An organization or enterprise is recognized by law as a legal entity when it meets all the conditions prescribed in Clause 1, Article 74 of the 2015 Civil Code: As an organization that is legally established, this organization must have a tight organizational structure and have assets independent of other individuals and organizations. A legal entity must be responsible for its own assets. A legal entity must participate in independent legal relations.

Accordingly, a legal entity will be responsible for its own assets. A business household, on the other hand, is responsible for the assets of the owner and the owner will have unlimited liability for the production and business activities of his/her business household, so a business household does not have legal status.

Thus, it can be seen that a business household does not meet all the conditions to be a legal entity. Therefore, a business household does not have legal status. In that case, a business household will not have its own seal, will not be allowed to open additional branches or representative offices. Business households are also not allowed to exercise the same rights as enterprises are exercising.

The second characteristic is that a business household is not a type of enterprise

According to Clause 10, Article 4 of the 2020 Enterprise Law, “10. An enterprise is an organization with its own name, assets, and a transaction office, established or registered for establishment in accordance with the provisions of law for the purpose of doing business.”

According to the above provisions, an enterprise is an organization with its own transaction office, its own name, and its own assets, legally established in accordance with the provisions of Vietnamese law. In our country today, there are many types of enterprises with different business lines such as: LLC, JSC, partnership, etc. According to the regulations presented above, a business household is a form of business registered by a member of a household or an individual in a household to establish a business household to trade in a certain product and this head will be responsible to the law with all of his assets when doing business.

Third, the owner of a business household is responsible indefinitely

The unlimited liability of a business household is similar to the liability of a private business owner. If the assets of the business are not enough to pay the debt, the business household must confiscate all assets not invested in the business. However, unlike a private enterprise, in the case of a family business owned by a group of people or a family, the unlimited liability of a family business will spread the risk to many members.

In case the business owner is owned by many people, the members must jointly and severally bear unlimited liability for all debts of the business owner. If the business is family-owned, all family members must bear joint liability. When the common assets are not enough to pay the debt, family members must use their own assets to pay the debt and pay other family members (joint and partial liability).

2. Conditions for business households to borrow capital from banks

Borrowing capital from banks is usually unsecured consumer loans, no collateral required, contracts are signed on the trust of both parties. The advantage of this form is that it allows consumers to easily borrow capital with flexible values, simple and clear procedures, no guarantee required. Financial companies and credit institutions approve loans as quickly as possible based on the customer’s products and business scale. In addition, customers can now borrow online to save time.

In order for the Bank to consider and decide to lend capital, the business owner must meet the loan conditions as prescribed in Article 7 of Circular 39/2016/TT-NHNN as follows:

– The business owner must have full civil act capacity as prescribed by law.

– The business owner’s need to borrow capital for legal purposes.

– The business owner must have a feasible capital use plan.

– Business households must demonstrate financial ability to repay the upcoming loan.

3. Procedures for business households to borrow capital from banks

To proceed with a business loan at a bank, the applicant will need to prepare a complete application and follow these steps:

Step 1: Go to the bank where the business household owner intends to borrow and request the bank to complete the loan procedures.

Step 2: The bank will send a specialist to guide and the business household owner will provide and fill in all the information to complete the loan application.

Step 3: After completing the loan application, the business household owner will submit the loan application and wait for the bank to approve the disbursement.

The following are the documents and papers that the business household owner needs to prepare when borrowing capital for business:

Identification documents of the borrower: Citizen identification card, passport or marriage status certificate.

loan application form according to the bank’s form
Documents to prove the borrower’s financial status according to regulations such as: Labor contract, lease contract, etc.

If it is a mortgage loan, there must be documents on assets to secure such as: The asset is land, there must be a land use right certificate, if the asset is a means of transport, there must be a vehicle registration certificate or the collateral is a bank savings account, etc.

In addition, the bank may request some other documents according to the Bank’s regulations depending on each form of loan.

4. Cases where business households need capital but are not allowed to lend

Credit institutions are not allowed to lend capital if they are in need of capital such as:

– Borrowing capital to carry out business investment activities in industries and professions prohibited by law.

– Borrowing capital to pay expenses or to meet financial needs of transactions prohibited by law.

– Borrowing capital to invest in business, use services to buy and sell goods in industries and professions prohibited by law

– Borrowing capital to buy gold bars.

– Borrowing capital to repay credit debts at the lending credit institution itself (except in cases where the bank lends to pay interest arising during the construction process, in which this interest cost is calculated in the total construction investment approved by the competent authority according to regulations)

– Borrowing capital from a bank to repay credit debts at other credit institutions and repay foreign loans, except in cases where loans are granted to repay loans before maturity, fully meeting the following conditions:

+ This loan is for business activities;

+ The loan term of the new loan does not exceed the remaining loan term of the old loan;

+ The loan has not been restructured.

We hope that some of the above information has helped you answer the question: What are the conditions for business households to borrow preferential loans from banks in 2024? If you want to learn more about legal issues, please contact VIET MY LAW AND ACCOUNTING.