What is the interest rate when a business lends to another business?

Pursuant to Article 468 of the 2015 Civil Code, it stipulates the calculation of interest rates when businesses lend to other businesses as follows:

Interest rate

1. Loan interest rate is agreed upon by the parties.

In case the parties have an agreement on interest rate, the agreed interest rate must not exceed 20%/year of the loan amount, unless other relevant laws stipulate otherwise. Based on the actual situation and the Government’s proposal, the National Assembly Standing Committee decides to adjust the above interest rate and reports to the National Assembly at the nearest session.

In case the agreed interest rate exceeds the limit interest rate specified in this Clause, the excess interest rate will not be effective.

2. In case the parties have an agreement on interest payment, but the interest rate is not clearly determined and there is a dispute about the interest rate, the interest rate is determined at 50% of the limited interest rate specified in Clause 1 of this Article at the time of debt repayment.

Thus, according to the above regulations, the agreed interest rate in the loan contract must comply with the provisions of Clause 1, Article 468 of the 2015 Civil Code, which is no more than 20%/year.

– In case the parties have an agreement on interest payment, but the interest rate is not clearly defined and there is a dispute over the interest rate, the interest rate is determined at 50% of the limit interest rate.

Thus, the maximum interest rate that a business can agree on in a loan contract for another business is 20%/year.

Can I pay in cash for a loan from another business?

According to Article 4 of Circular 09/2015/TT-BTC regulating payment methods in borrowing, lending and mutual loan repayment transactions between businesses that are not credit institutions as follows:

Forms of payment in borrowing, lending and mutual loan repayment transactions between businesses that are not credit institutions

1. Enterprises that are not credit institutions (are enterprises that are not established, organized and operate according to the provisions of the Law on Credit Institutions) when carrying out borrowing, lending and mutual loan repayment transactions use the forms of payment specified in Clause 2, Article 3 of this Circular.

2. Enterprises that are not credit institutions when carrying out borrowing, lending and repaying mutual loans with assets (not money), clearing debts, transferring debt obligations shall comply with the provisions of law on enterprises.

And, in Article 3 of Circular 09/2015/TT-BTC stipulating the form of payment in capital contribution transactions and buying, selling and transferring capital contributions to other enterprises such as following:

Form of payment in capital contribution transactions and buying, selling and transferring capital contributions to other enterprises

…

2. When performing capital contribution transactions and buying, selling, and transferring capital contributions to other businesses, businesses use the following forms:

a) Payment by Check;

b) Payment by payment order – money transfer;

c) Other appropriate non-cash payment forms according to current regulations action.

From the above regulations, it can be concluded that when performing a loan transaction from another enterprise, the borrowing enterprise is not allowed to pay in cash.

Instead, other forms of payment can be used such as checks, payment orders – money transfers, or other non-cash forms prescribed by this Circular.

If an enterprise lends an interest-free loan to another enterprise, can it be required to pay interest when due but the borrower enterprise fails to repay the debt?

Pursuant to Article 466 of the 2015 Civil Code, the provisions on the debt repayment obligation in case an enterprise lends to another enterprise are as follows:

The party’s debt repayment obligation loan

1. The borrower whose asset is money must pay in full when due; If the property is an object, the object must be returned in the same quantity and quality, unless otherwise agreed.

2. In case the borrower cannot repay the item, he/she can pay in money according to the value of the borrowed item at the place and time of repayment, if agreed by the lender.

3. The place of debt repayment is the place of residence or head office of the lender, unless otherwise agreed.

4. In case of a loan without interest and when the borrower fails to repay the debt or does not pay in full at the due date, the lender has the right to request payment of interest at the interest rate prescribed in Clause 2, Article 468 of this Code on the late payment amount corresponding to the late payment period, unless otherwise agreed or otherwise prescribed by law.

5. In case the loan has interest but the borrower does not pay or does not pay in full at the due date, the borrower must pay interest as follows:

a) Interest on the principal debt according to the interest rate agreed in the contract corresponding to the loan term but not paid at the due date; In case of late payment, interest must also be paid at the interest rate specified in Clause 2, Article 468 of this Code;

b) Interest on overdue unpaid principal is equal to 150% of the loan interest rate according to the contract corresponding to the period of late payment, unless otherwise agreed.

Thus, in the case of a business lending to another business without interest, if the borrower fails to repay the loan or does not pay in full, the lender has the right to request the borrower to pay interest.

The interest rate will be determined according to the provisions of Clause 2, Article 468 of the 2015 Civil Code. This interest rate is calculated on the late payment amount corresponding to the late payment period.

However, there are some exceptions or special arrangements that may affect the lender’s rights. If there are other agreements or separate laws, conditions and benefits may change depending on those agreements.