on the part of the commercial bank by sharing information honestly, openly and in good faith with the commercial bank.
SMEs need to actively participate in local business associations to learn from management and business experiences, strengthen connections and cooperation between member SMEs, and develop and consolidate their brands. SMEs need to boldly engage in dialogue with local authorities to resolve difficulties and obstacles for SMEs.
At the same time, SMEs need to proactively cooperate with large enterprises in Phu Tho province, as well as domestic and international enterprises to take advantage of capital, technology, markets, etc. SMEs need to strengthen joint ventures and associations with large, reputable enterprises in establishing, operating and implementing investment projects. SMEs need to strengthen their relationships with large enterprises in supplying raw materials, performing subcontracting, gradually forming a supporting industrial network and especially creating a satellite network for product distribution. This is a two-way relationship, binding each other, large enterprises firmly guarantee SMEs in terms of market, finance, technology, technical standards and management experience, etc. In return, SMEs guarantee large enterprises in terms of supporting technology, product consumption network, etc. Through that, SMEs will learn and accumulate more experience, and thanks to the participation of large enterprise partners, the need for loans for investment projects/business production plans will also be more trusted by commercial banks to provide capital.
3.2.1.4. Small and medium enterprises need to exploit and effectively promote their existing potential and internal resources, and focus production and business on areas with local potential and advantages and areas with State incentives.
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When macro policies have stabilized, the Government and local authorities' policies to support SMEs are very positive, the economy is gradually recovering.
After the crisis, the banking branches in Phu Tho province are full of liquidity, so SMEs need to proactively improve their internal strength, seek support from related parties to maintain stable production, increase production and business efficiency, create new positions and strengths in the trend of international economic integration. SMEs also need to recognize and correctly identify current difficulties in capital, in order to have clear, decisive and strong solutions in handling difficulties to gradually revive their production and business activities. To take advantage of investment incentives, tax incentives, capital, ... SMEs in Phu Tho province need to focus on investing in industries and fields identified as potential and advantages of the province.
Based on the actual situation as well as their development orientation, SMEs need to develop long-term business strategies and plans. Thanks to that, SMEs will take full advantage of and maximize resources for production and business, contributing to increasing the revenue and profit of the enterprise, ensuring the ability to repay the debt of the enterprise. From there, access to bank credit capital will be higher and easier.
SMEs need to increase their equity capital to address the capital shortage, increase their financial autonomy to meet the credit conditions of commercial banks. At the same time, when a business increases its capital, it will demonstrate the commitment and responsibility of the business owner in the field of production and business activities as well as the level of participation in investment projects, thereby reducing risks in the lending process of commercial banks.
The larger the SME scale, the easier it is for the enterprise to access bank credit capital. However, establishing an SME with a large initial investment capital is sometimes impossible for SMEs that have converted from a household business model or are young. Therefore, the issue of improving production and business efficiency is an issue that SMEs must focus on.
to be able to expand the scale of long-term investment. In addition, production and business efficiency is also the most convincing evidence for commercial banks to decide to invest and share risks with businesses.
For newly established SMEs, it is necessary to build up reputation to be treated fairly with long-standing enterprises in banking credit relations. Newly established SMEs should find reputable partners who have long-standing credit relations with commercial banks to establish a buying and selling relationship, through which commercial banks will have more information about the enterprise. Use advertising and communication means to introduce the name of your enterprise, thereby improving the ability to access bank credit capital.
In addition, from another perspective, it shows that in credit relations, SMEs play the role of "customers", commercial banks play the role of "sellers", but the current reality is that most "customers" have to find "sellers" themselves when they need to borrow capital. Therefore, in order for commercial banks to proactively seek out SMEs to solve their capital congestion problem, SMEs must improve their business efficiency, affirm their financial capacity, so that in the eyes of investors (including commercial banks), SMEs will be a fertile land for profitable investment. Only then can SMEs create the attractiveness to attract external investment sources, including bank loans,... At that time, SMEs will be more focused on their "mission", instead of having to worry every day about finding ways to solve the capital problem for businesses.
3.2.1.5. Strengthen training and fostering to improve management and executive capacity, international economic integration, etc. for leaders and advisory teams of small and medium enterprises. Special attention should be paid to improving the ability to establish, manage and implement investment projects/feasible production and business plans.
SMEs need to identify human resources as an important driving force for production and business activities, human resource training is an "investment" rather than an "expense". SMEs need to create conditions for employees to participate in training, professional development, and professional improvement, etc., thereby helping businesses manage cash flow well, and businesses take the initiative in establishing investment projects/production and business plans in accordance with the requirements of commercial banks. SMEs need to focus on improving the capacity, qualifications and reputation of business leaders because these are the executives, directly deciding on the existence and development of the business, and are the legal representatives of the business, committing and implementing debt repayment obligations. The qualifications of business leaders and advisory teams are very important criteria for commercial banks to decide on lending capital to SMEs.
SME leaders need to continue to promote the experiences gained from production and business activities in the market, and at the same time, constantly learn to improve their qualifications, access new knowledge, and implement international economic integration. At the same time, SMEs also need to increase their understanding of the regulations in the credit granting regulations and product packages for SMEs of commercial banks.
SMEs need to actively participate in training courses organized by business associations and provincial departments and agencies, and should also participate in seminars and conferences organized by local training institutions such as Hung Vuong University, Viet Tri University of Industry, etc. to update market information, improve qualifications, create new economic relationships, etc. Currently, some training institutions such as the Center for Training and Consulting on Finance and Accounting of the Academy of Finance, or the Center for Research and Consulting on Economics and Finance of Hung Vuong University, etc. regularly enroll students in training courses in Phu Tho province on preparing and analyzing financial statements.
finance, investment project establishment and management, financial management, etc. Therefore, SME leaders should pay attention to sending staff to participate in order to improve the ability to establish investment projects/business production plans and financial reports, to meet the needs of management agencies and use to borrow capital from banks, as well as the enterprises themselves.
In addition, one of the important bases for commercial banks to decide on granting credit to SMEs' borrowing needs is that the investment projects/business production plans of SMEs must be feasible and effective. Therefore, SMEs need to build, protect and convince commercial banks to grant credit for their investment projects/business production plans. Limit investment projects/business production plans with high risks that are formed based on personal intentions, temporary in nature, and completely unrelated to the experience and expertise that the enterprise has previously conducted. In fact, many SMEs have quite good business ideas but cannot develop them into specific plans and projects. Therefore, in addition to enhancing training and fostering knowledge of economics, finance, accounting, etc. for leaders and advisory teams, SMEs need to set aside a certain amount of funds to attract highly qualified workers to join the business or use professional consulting services from financial consulting companies, commercial banks, universities, academies, etc. This is also a solution to help SMEs easily access external capital sources without missing out on business plans. SMEs can connect with universities and academies to create links between scientists and businesses. Thereby, scientists, especially economic researchers, will help SMEs solve business difficulties, advise and orient strategies.
business in the coming years.
3.2.1.6. Increase transparency of financial situation of small and medium enterprises
SMEs need to improve their financial situation, which not only helps SMEs use resources more effectively, reduce costs and risks, but also helps commercial banks have sufficient information to review and evaluate investment projects/business production plans of SMEs and estimate possible risks when there are market fluctuations.
The lack of transparency in financial situation, the situation of maintaining multiple accounting systems at the same time to prepare financial statements for predetermined purposes is one of the reasons that hinder SMEs from accessing bank credit capital. Therefore, in order to contribute to providing honest information about the financial situation of SMEs, creating trust for the lenders when through financial statements, commercial banks can correctly assess the financial health, correctly assess the profitability or solvency of the enterprise, that requires SMEs to improve the quality of information on financial statements.
SMEs need to have a clear and transparent financial accounting system so that commercial banks can better understand the business operations. At the same time, SMEs should prepare management accounting reports to regularly analyze the implementation of economic indicators of the enterprise, provide information to develop plans, estimates as well as evaluate and select optimal investment projects/business production plans. SMEs need to have a roadmap to apply international standards to the management of the enterprise, ensuring accountability and transparency in decision making to help SMEs minimize risks, thereby improving access to bank credit capital and reducing the cost of accessing loans for enterprises.
SME managers need to pay attention to financial management, because it affects the healthy financial structure and cash flow during the period, as well as the business performance of the enterprise. To demonstrate transparent financial reports, authentic and reliable information, financial reports must be audited by an independent unit, thereby helping SMEs to access bank credit more easily. Auditing must be based on the needs of the enterprise, not on responsibilities and obligations.
In the current situation, some SMEs take advantage of legal loopholes, falsify accounting books to evade taxes, and make information on financial reports different from reality, which often makes commercial banks distrustful when granting credit. Therefore, businesses need to demonstrate their true financial capacity and reputation to all state management agencies in complying with regulations, thereby creating trust in all entities with which the business has relationships, including commercial banks.
SMEs need to make non-cash payments in economic relations. This is very beneficial for SMEs in ensuring regulations on loan disbursement, on the other hand, it helps SMEs establish professional relationships with commercial banks. Moreover, all payment activities of SMEs are through commercial banks, so commercial banks will easily grasp the financial situation of enterprises, thereby reducing information asymmetry in lending. Transparent and public financial information helps to enhance the responsibility of business owners for the use of financial resources, while creating conditions for state management agencies and commercial banks to grasp the situation and operational needs of enterprises, thereby having appropriate and timely support policies.
3.2.2. For commercial banks
Research on the experience of commercial banks around the world shows that the SME credit market was once considered by commercial banks to be a risky, costly and difficult-to-serve market, but now commercial banks are looking for effective solutions to overcome these obstacles. Expanding SME credit has become a strategic goal of commercial banks around the world, and this will become a market segment that brings great profits to commercial banks. Along with the general trend of commercial banks around the world as well as contributing to solving capital difficulties for SMEs, commercial banks need to implement the following solutions:
3.2.2.1. Commercial banks must truly understand small and medium enterprises in order to make timely adjustments to the bank's credit policy.
SMEs have some specific characteristics such as low experience and reputation of business owners, small capital scale, operating in many different fields and industries, incomplete supporting documents, low demand for loans but commercial banks have to spend a lot of management costs when lending, etc. Therefore, from the experience of commercial banks around the world, it shows that in order to successfully expand credit for SMEs, the prerequisite is that commercial banks must really understand SMEs [57]. Once they have a clear understanding of the scale of credit for SMEs, market segments, characteristics and needs of SMEs, commercial banks will recognize the obstacles and potential risks when expanding credit for SMEs, the opportunities and competitive advantages of commercial banks as well as the core success factors. To do this, commercial banks need to implement the following solutions:
Firstly, commercial banks need to conduct surveys and assess the needs of traditional and potential SME customers. On that basis, assess the capital supply capacity of commercial banks, the acceptable level of risk and cost when granting loans.