Project financing for an FDI manufacturing project in Vietnam is assembled from four sources, and the mix is constrained by rules that have nothing to do with the bank’s credit appetite. Understanding those constraints before approaching lenders is what separates a fundable structure from a renegotiated one.
The four sources of FDI project financing
Charter capital, contributed within ninety days through the direct investment capital account – the discipline in our charter capital guide. Offshore shareholder or bank debt, registered with the State Bank as set out in our offshore loan guide.
Onshore bank debt from Vietnamese or foreign-bank branches, which avoids currency mismatch where revenue is in dong but is generally priced higher. And supplier or equipment finance, often the cheapest source for the machinery component and frequently overlooked.
What constrains the project financing mix
Three rules bind. The ninety-day equity window, which caps how much of the funding can practically be equity for a project spending over several years. The interest deductibility cap, which limits how far leverage improves the after-tax outcome. And the registered capital schedule in the investment certificate, which governs the pace at which foreign capital may enter and must match the drawdown plan.
Sponsors who design the capital structure against the bank’s term sheet alone, without these three, routinely rework it – and reworking after the certificate is issued means an IRC adjustment as well as a financing amendment.
What lenders assess in FDI project financing
Four things. Security – and in Vietnam the value of security turns on the land instrument, particularly whether rent was paid annually or once for the term, as our land use rights guide explains. Completion risk, which is why the EPC contract and its guarantees matter to the lender as much as to the sponsor.
Offtake or revenue visibility, which for contract manufacturers means customer agreements and for merchant operations means market analysis. And sponsor support – completion guarantees and cost overrun undertakings, which are frequently the difference between a facility being offered and being declined.
Sequencing finance with licensing
The order that works: settle the capital structure, obtain the certificate reflecting a schedule the structure can deliver, register the offshore facility, then draw. Sponsors who sign facility documents before the certificate schedule is fixed find the two inconsistent, and it is the certificate that governs.
Equipment financing should be sequenced with the exemption position in our import duty exemption guide, since machinery arriving before documentation is complete strands capital at the port.
FDI project financing FAQs
Can Vietnamese banks lend to FDI companies?
Yes, and onshore lending avoids the currency mismatch that offshore borrowing creates for dong-earning projects. Pricing and tenor typically favour offshore, so many structures blend both.
What debt-to-equity ratio works?
Model against the interest deductibility cap and the disbursement schedule rather than a target ratio – the binding constraint is usually tax, not the lender.
When should financing work begin?
Alongside licensing, not after it, since the two documents must be consistent. Our project finance team runs them together, and texts are published via the Ministry of Finance.
Building the project financing model
A model that satisfies both the lender and the regulator has four layers. Sources and uses reconciled to the registered capital schedule, so that every dollar entering Vietnam has a lawful route and a recorded timetable. A drawdown profile matched to construction milestones rather than to calendar quarters.
An interest deductibility test run year by year across construction and ramp-up, not at steady state, since the cap binds hardest when EBITDA is lowest. And a repatriation path showing how profits and loan repayments will lawfully leave, tested against withholding and treaty positions.
Sponsors who present that model to lenders shorten credit approval materially, because it answers the questions a Vietnamese credit committee would otherwise ask in three rounds. Sponsors who present a conventional project financing model without the regulatory layer spend those rounds anyway.
This article is provided for general information only and does not constitute legal advice for any specific case. Regulations may change – please consult a qualified professional before acting. Should further analysis be required, please contact one of our lawyers below.
