No business can function without capital. From new businesses to established businesses looking to expand, all require proper financing. The procedure of obtaining business loans vary from bank to bank and business to business.
Broadly speaking, companies can look at two ways of getting business loans- either they can raise capital from within the country, or they can look beyond country border lines. The government opened up the Indian economy in 1991 with the motive to encourage external finance and foreign trade.
Today, more and more businesses are looking at overseas financial pools. One major reason that can be attributed to this can be the relatively cheaper interest rates as compared to Indian financial markets. However, obtaining foreign business loans come with their share of complex regulations. Rules and regulations set forth by the Reserve Bank of India are still debated.
The laws for external borrowings can seem intricate and even overwhelming. This is where FDI India comes in. As soft loan facilitators, we offer professional supervision over obtaining business loans from overseas.
Let us first define what exactly are soft loans?
Foreign soft loans for businesses are commercial loans given in the form of bank loans, buyers’ credit, suppliers’ credit, and shareholder’s loans. These are availed by any Indian borrower from non-resident moneylenders. These must have at least an average maturity of 3 years.
We help you get substantial loans for your business by connecting you to foreign investors.
At some point or the other, every business is required to take a loan. In India, interest rates are higher as compared to some developed countries. If you borrow money from a foreign lender, you can raise capital at a substantially lower rate. The only drawback is the heavy regulations that come with external commercial borrowings.
There are two routes to access external commercial borrowings or ECB:
- Automatic Route: Under the automatic route, the borrower can get a loan from a foreign entity without a prior approval from the Reserve Bank of India. However, here the loan agreement has to be registered with the RBI.
- Approval Route: Under the approval route, in order to get a loan from a foreign entity, the borrower is required to submit an application with the RBI in the prescribed form through authorized dealer as specified by the RBI.
External Commercial Borrowings or ECB are commercial loans in the form of buyer’s credit, bank loans, supplier’s credit, floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible from non-resident lenders.