Foreign loans are considered a financial lever for enterprises in Vietnam, especially loans from financial companies and investment funds. For foreign-invested enterprises that have established a presence in Vietnam, foreign loans provide a source of capital to operate their business in Vietnam, particularly in situations where investors are not yet confident in increasing their capital contribution. However, the loan tenor is directly linked to the purpose of utilizing the foreign loan. Therefore, enterprises need to precisely determine the purpose of the loan in order to decide whether to enter into a short-term foreign loan or a medium- to long-term foreign loan.
1. Short-term foreign loan
A short-term foreign loan is a foreign loan without Government guarantee and with a loan tenor of up to one (01) year. In addition to the requirement on tenor, a short-term foreign loan may only be established for proper purposes. Accordingly, the borrower may only use short-term foreign loans to restructure foreign debts and to pay short-term liabilities payable in cash (excluding principal repayment of domestic loans). Such short-term liabilities include those arising from the borrower’s investment projects, business plans, or other projects, determined in accordance with the prevailing regulations on enterprise accounting standards.
Currently, short-term foreign loans are not subject to loan registration requirements but are subject to loan reporting obligations. Specifically, on a monthly basis, no later than the 5th day of the following month, the borrower must submit an online report on the implementation status of short-, medium-, and long-term loans via the Online portal. In case the portal encounters technical errors preventing submission, the borrower must submit a written report.
In practice, we often observe that enterprises tend to neglect their reporting obligation for short-term loans, which exposes them to the risk of administrative sanctions. When the enterprise makes repayments or converts a foreign loan, the regulatory authorities will examine compliance, including whether the borrower has used the loan for the purposes prescribed by law.
2. Medium- and long-term foreign loans
Medium- and long-term foreign loans are loans with a tenor of one (01) year or more, including the conversion of a short-term loan into a medium- or long-term loan. Under the regulations, Vietnamese enterprises (the borrower) may only obtain medium- or long-term foreign loans to serve business purposes such as: implementing investment projects, executing business or production plans, or restructuring the borrower’s foreign debts.
Registration of foreign loans is required for the following cases: medium- and long-term foreign loans; short-term loans whose principal repayment deadline is extended such that the total loan term exceeds one (01) year; and short-term loans without any extension agreement but which still have outstanding principal (including accrued interest capitalized into principal) as of the date exactly one (01) year from the first drawdown date, except where the borrower fully repays such outstanding principal within thirty (30) working days from the date exactly one (01) year after the first drawdown date.
The borrower determines the loan tenor to assess whether registration is required. For loans initially classified as medium- and long-term, the tenor is counted from the scheduled first drawdown date to the scheduled final principal repayment date, based on the provisions of the foreign loan agreement. For short-term loans extended in repayment, the tenor is counted from the first drawdown date to the scheduled final principal repayment date under the foreign loan agreement and extension agreement. For short-term loans without an extension agreement but with outstanding principal, the tenor is counted from the first drawdown date to the scheduled final principal repayment date.
The drawdown date is defined as: the date funds are credited to the borrower’s account for cash disbursement loans; the date the lender makes payment to a non-resident supplier of goods or services under a sale or service contract with the borrower; the date the borrower is recorded as having fulfilled payment obligations to the lender in case the parties opt for disbursement of a medium- or long-term foreign loan via clearing; and other dates determined specifically depending on the case.
- Foreign loan agreements: short-term, medium- and long-term
A foreign loan agreement is one or several documents recording the agreement between the parties, under which the lender provides or commits to provide the borrower with a certain amount of funds or assets (in the case of a foreign loan under a financial leasing contract) to be used for a defined purpose within a certain period, with the obligation of repayment of principal and interest (if interest is agreed). A foreign loan agreement must be in writing, and if executed in the form of electronic data messages, it must comply with the regulations on electronic transactions.
In terms of content, the foreign loan agreement or commonly referred to as the foreign loan contract must accurately record the purpose of loan utilization, loan currency, disbursement schedule, rights and obligations of the parties, etc. Regarding loan currency, parties must note that foreign loans are denominated in foreign currency. Foreign loans in Vietnamese dong are only permitted in the following cases: the borrower is a microfinance institution; the borrower is a foreign-invested enterprise borrowing from profit derived from direct investment activities in Vietnam of the foreign investor who contributes capital in the borrower; or the borrower disburses and repays in foreign currency while the loan obligation is determined in Vietnamese dong.
The classification of a loan agreement as short-term or long-term is not merely a technical matter but is a legal checkpoint that directly impacts the enterprise’s financial safety and reputation. Even minor mistakes in determining the loan tenor or handling extensions can turn a lawful loan into a violation, leading to serious consequences: administrative sanctions, disallowance of interest expenses for tax deduction, or difficulties in loan-to-equity conversion or other restructurings. Moreover, compliance facilitates the enterprise’s ability to obtain approval for future foreign loan registrations.
Time or writing: September 22nd, 2025
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You can refer for more information:
- When should enterprises enter into a short-term or long-term foreign loan agreement?
- Key Highlights of Circular No. 25/2025/TT-NHNN on the Opening and Use of Payment Accounts
- New Provisions under Decree No. 239/2025/ND-CP Providing Guidance on Certain Articles of the Law on Investment (Part 2)
- New Provisions under Decree No. 239/2025/ND-CP Providing Guidance on Certain Articles of the Law on Investment (Part 1)
