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TYPE OF FOREIGN LOANS
In the context of a growing global economy, the use of foreign loans has become more important than ever for businesses and organizations. To promote the development and expansion of business activities, finding and using various types of foreign loans has become an important strategy
However, to clearly understand and choose the right type of loan, businesses also need to have a firm grasp of the different types of foreign loans and the conditions of each type of loan to choose the appropriate type for their business. Siglaw’s following article will delve into the types of foreign loans to help businesses make smart and effective decisions on financial issues.
- What is a foreign loan?
Foreign loan is a general term to refer to foreign loans not guaranteed by the Government (self-borrowed, self-paid loans) and foreign loans guaranteed by the Government in all forms of foreign loans through contracts. loan, goods import contract with deferred payment, loan entrustment contract, financial leasing contract or issuance of debt instruments on the international market by the borrower.
- Types of foreign loans today
- Foreign loans are guaranteed by the Government
This loan exists in the form of a loan contract, a deferred payment goods import contract, a loan entrustment contract, a financial leasing contract, and the issuance of debt instruments on the international market by the borrower.
Foreign loans in the form of deferred payment of goods imports are goods imports with the first capital withdrawal date before the final payment date, in which:
The date of capital withdrawal of foreign loans in the form of imported goods on deferred payment is: the 90th day from the date of issuance of transport documents in case the bank providing account services requires payment documents to be have transport documents; 45th day from the date of completion of inspection recorded on the cleared customs declaration in case the bank providing account services does not require payment documents to include transport documents.
The final payment date is determined as: the last payment date of the contractual payment period; Final actual payment date in case of non-performance under the contract or the contract does not specifically stipulate a payment deadline. The term of a foreign loan in the form of imported goods with deferred payment is the term determined from the date of first capital withdrawal to the date of final payment.
- Foreign loans are not guaranteed by the Government
A foreign loan not guaranteed by the Government means the borrower borrows from abroad by self-borrowing and is responsible for repaying the debt to the foreign lender. In this case, it can be divided into short-term foreign loans and medium and long-term foreign loans.
Short-term self-borrowed and self-paid foreign loans are foreign loans that are not guaranteed by the Government and can be due for up to 1 year. For this type of loan, the borrower is not allowed to borrow short-term for medium or long-term capital purposes.
Medium- and long-term foreign loans borrowed by oneself and repaid by oneself are foreign loans not guaranteed by the Government with a term of over 1 year. For this type of loan, the borrower has an investment project using foreign loans that has been granted an investment certificate , and the number of medium and long-term loans (including domestic loan debt) of the borrower is Maximum loan for that project must not exceed the difference between total investment capital and contributed capital recorded in the investment certificate.
In case the borrower borrows a foreign loan to implement production and business plans or investment projects without an Investment Certificate, the medium and long-term debt balance (including domestic loan balance) of the borrower Loans do not exceed the total loan capital needs in production and business plans or investment projects approved by competent authorities according to legal regulations.
- Legal regulations on foreign loans
Regarding loan agreement: foreign loan agreement must be signed in writing before loan disbursement and does not violate the provisions of Vietnamese law.
Regarding foreign loan currency: Foreign loan currency is foreign currency, foreign borrowing in Vietnam Dong can only be done in the following cases: the borrower is a microfinance institution; The borrower is an FDI enterprise borrowing from profits divided in Vietnam Dong from direct investment activities of the lender being a foreign investor contributing capital to the borrower; and other cases when considered and approved by the Governor of the State Bank.
Regarding loan security transactions: Security transactions for foreign loans are not contrary to current relevant regulations of Vietnamese law. The use of shares, stocks, capital contributions of the Enterprise or convertible bonds issued by the Enterprise as mortgage for non-residents who are foreign lenders or related parties must ensure compliance with the provisions of this Law. regulations on securities, holding rates of foreign investors in Vietnamese enterprises and/or other relevant legal provisions.
Thus, having a clear and correct understanding of the types of foreign loans is important so that businesses can take advantage of foreign loans to go far. From short-term loans to long-term loans or other types of loans, all bring unique opportunities and challenges to businesses. Most importantly, it is necessary to clearly understand the needs and payment ability to choose the right type of loan that suits the specific development strategy of each business.
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