Regulations on capital financing for small businesses

Capital financing is an important factor to help small businesses carry out their investment projects and business plans. Businesses need to learn about regulations related to forms of capital funding, funding funds and related issues. The article below will advise on some important issues about capital financing for small businesses.

What is small business financing?

Financing for small businesses means that the Small and Medium Enterprise Development Fund (hereinafter referred to as the Fund) finances capital and carries out activities to support capacity building for small and medium enterprises. Capital financing plays an important role in the development of small businesses.

Capital financing helps small businesses access capital to develop their business. Funding capital helps businesses invest in expanding production and improving competitiveness. At the same time, capital financing creates conditions for small businesses to access resources to innovate technology and develop new products.

Capital financing also helps small businesses overcome financial difficulties during the start-up phase. Funding capital helps businesses cover operating costs and maintain production and business during the initial period. In addition, capital funding also creates motivation for small businesses to develop efforts, contributing to the country’s economic growth.

Pursuant to the content of Clause 5, Article 4 of Decree 39/2019/ND-CP dated May 10, 2024 of the Government on the organization and operation of the Small and Medium Enterprise Development Fund.

Principles of capital financing for small businesses

Financing capital for small businesses complies with the principles specified in Article 28 of Decree 39/2019/ND-CP (supplemented in Clause 12, Article 1 of Decree 45/2024/ND-CP. Specifically:

• The fund funds part of the costs for investment items in factory construction, purchasing machinery and equipment of the project, and production and business plans of small businesses that meet the conditions for capital financing for businesses. small.
• The funding currency is Vietnamese Dong.
• Each small and medium-sized enterprise is considered and decided by the Fund for capital funding no more than once.

Capital sponsorship must ensure the right subjects and purposes of use according to regulations, and must ensure fairness and non-discrimination between businesses that meet the conditions.

Financing conditions for small businesses

To receive capital funding, small businesses need to meet the conditions specified in Article 29 of Decree 39/2019/ND-CP (amended by Clause 13, Article 1 of Decree 45/2024/ND-CP).

Small and medium-sized enterprises will be considered and decided to fund capital by the Fund when they meet the conditions specified in Points a, b, c, Clause 1 or Point c, Clause 1, Point a, Point b, Clause 2 or Point C. Clause 1, Point a, Point b Clause 3 Article 16 Decree 39/2019/ND-CP (amended by Clause 1 Article 9 Decree 45/2024/ND-CP), specifically:

Case 01: Innovative small and medium-sized startups are funded when they meet the following conditions:

• Meets the criteria for innovative small and medium-sized startups as prescribed in the Law on Support for Small Businesses and its guiding documents.
• Have feasible projects and production and business plans that meet the criteria for identifying innovative small and medium-sized startups
• Ensure that the equity capital participating in the project, production and business plan is at least 20% of the total investment capital to implement the project, production and business plan and must ensure sufficient capital for implementation. projects, production and business plans
• Meets regulations on loan security as prescribed in Decree 39/2019/ND-CP

Case 02: Small and medium-sized enterprises participating in industry clusters are funded by the Fund when they meet the following conditions:

• Ensure that the equity capital participating in the project, production and business plan is at least 20% of the total investment capital to implement the project, production and business plan and must ensure sufficient capital for implementation. projects, production and business plans
• Meets regulations on loan security as prescribed in Decree 39/2019/ND-CP
• Have feasible projects and production and business plans in the industry or field of the industrial cluster

Case 03: Small and medium-sized enterprises participating in the value chain are funded by the Fund when they meet the following conditions:

• Participate in the value chain according to the provisions of the Law on Support for Small and Medium Enterprises and its guiding documents
• Have feasible projects, production and business plans and have products in the value chain

In particular, small businesses are identified according to the fields of agriculture, forestry, and fisheries; industry and construction; trade and services and meet the criteria determined under Article 4 of the Law on Small Business Support and its guiding documents, specifically as follows:

• The average number of employees participating in social insurance per year is no more than 200 people
• Total capital must not exceed 100 billion VND or Total revenue of the preceding year must not exceed 300 billion VND.

Small businesses need to meet the above conditions to receive capital funding from the Fund.

Procedures for requesting capital funding for small businesses

 Documents need to be prepared

Small businesses need to prepare documents requesting capital funding according to the provisions of Article 31 of Decree 39/2019/ND-CP. Profile includes:

• Sponsorship request form for small and medium-sized enterprises;
• Project records, production and business plans of small enterprises and documents proving that small and medium-sized enterprises meet the funding conditions stated above.

An important component in the dossier is the project and production and business plan. The project needs to clearly state its objectives, content, progress and expected effects. Enterprises need to provide financial statements of the immediately preceding year and the most recent reporting period. In addition, the application must contain documents proving financial capacity and ability to mobilize capital.

Implementation process

The process of requesting capital funding for small businesses is carried out as follows:

Step 1: Enterprises submit applications for capital funding directly at the Small Business Development Fund or by post.

Step 2: The Fund receives applications and performs the following tasks:

• Verify completeness;
• Appraise the feasibility of the project, production and business plans and capital financing conditions;
• Make funding decisions;
• Disbursement of funding according to the principle of ensuring clear division of responsibilities and obligations of relevant individuals and organizations in the process of appraisal, decision on funding and disbursement of funding.
• Notice for small and medium enterprises.

In case of refusal of sponsorship, the Fund must notify the enterprise in writing of the reason for refusal.

It should be noted that the Fund established a Capital Funding Approval Council to consider and make capital funding decisions. The Board of Members decides on the composition of the Capital Funding Approval Council.

Capital financing consulting services for small businesses

At Long Phan, we provide capital financing consulting services for small businesses, including the following service scope:

• Consulting on conditions for small businesses to be approved for capital funding
• Consulting on documents and procedures for requesting capital funding for small businesses
• Consulting on capital funding agreements between small businesses and the Fund
• Consulting on acceptance of capital financing items for small businesses
• Support in preparing capital sponsorship application documents, capital sponsorship acceptance application documents and other related documents and materials
• Support customers in implementing capital financing request procedures

Long Phan is committed to providing professional, quality consulting services, supporting customers in accessing effective funding sources.

For small businesses to successfully receive capital funding from the Small and Medium Enterprise Development Fund, it is very important to clearly understand the principles and conditions of capital funding. Customers need to prepare complete documents and comply with the capital financing process. If you need support in financing your business, please contact Long Phan immediately via hotline: 090673568 for more details.