Navigating the Complexities of Securing Foreign Loans in Bangladesh
In recent years, obtaining foreign loans in Bangladesh has become an increasingly viable option for businesses due to the benefits of lower interest rates and access to substantial funds from single lenders. LegalSeba.com offers comprehensive expertise to assist businesses in navigating the intricate process of securing foreign loans, ensuring adherence to all regulatory requirements and lender-specific criteria.
Our Services
1. Meeting Foreign Lenders’ Requirements
Ensuring Compliance: Foreign lenders typically impose stringent requirements on borrowers to mitigate risks and ensure compliance with international standards. LegalSeba.com provides thorough assistance to ensure that borrowers meet these requirements, which include:
- Licenses and Permits: LegalSeba.com ensures that the borrower possesses all necessary licenses and permits to legally conduct business in Bangladesh. This includes obtaining and maintaining trade licenses, industry-specific permits, and any other regulatory authorizations required by law.
- Corporate Records: It is imperative that all corporate records are current and up-to-date. LegalSeba.com assists in the maintenance and regular updating of corporate documents, including the memorandum and articles of association, board resolutions, and shareholder agreements, to ensure full compliance.
- Environmental Compliance: Borrowers must adhere to all applicable environmental regulations to avoid legal liabilities and ensure sustainable business practices. LegalSeba.com guides businesses in complying with environmental laws, obtaining necessary environmental clearances, and implementing environmentally friendly practices.
- Industry Certifications: Relevant industry certifications, such as ISO certification, demonstrate a commitment to quality and compliance with industry standards. LegalSeba.com assists in obtaining these certifications, which can enhance the borrower’s credibility and attractiveness to foreign lenders.
- Labour Law Compliance: Compliance with labour laws is critical to avoid legal disputes and ensure fair treatment of employees. LegalSeba.com ensures that the borrower adheres to all labour laws, including regulations on working conditions, wages, and the prohibition of child labour.
- Insurance: Adequate insurance coverage is essential to protect the borrower and the project from potential risks. LegalSeba.com assists in securing comprehensive insurance policies that cover various risks, including property, liability, and business interruption.
2. Due Diligence and Reporting
Comprehensive Due Diligence: Foreign lenders conduct rigorous due diligence to assess the financial health, technical feasibility, and legal standing of the borrower. LegalSeba.com facilitates this process by ensuring thorough preparation and compliance. Due diligence typically includes:
- Financial Due Diligence: Conducted by the lender to assess the financial stability and creditworthiness of the borrower. LegalSeba.com assists in preparing financial statements, business plans, and other financial documents required for this assessment.
- Technical, Environmental, and Legal Due Diligence: Lenders may appoint external consultants to conduct these assessments, with costs borne by the borrower. LegalSeba.com coordinates with these consultants to provide all necessary documentation and information, ensuring a smooth and efficient due diligence process.
Post-Disbursement Reporting: Lenders may require ongoing reporting to monitor compliance and financial performance post-disbursement. LegalSeba.com assists in meeting these requirements, including:
- Process Agent: Appointing a process agent in a country of the lender’s choice to handle legal and administrative matters related to the loan.
- Auditor: Engaging an auditor affiliated with an international auditing firm to ensure financial transparency and accountability.
- Compliance Manager: Appointing a compliance manager to oversee regulatory compliance and submit timely reports directly to the lender.
3. Regulatory Permission
Obtaining Necessary Approvals: Securing foreign loans requires specific regulatory approvals based on the loan term. LegalSeba.com guides borrowers through the approval process for both short-term and long-term loans:
- Short-Term Loans (less than one year): Usually, do not require approval from Bangladesh Bank subject to terms and conditons and payment modality of the Loan facilities. LegalSeba.com assists in preparing and submitting the necessary documentation to obtain this approval from Authorized Dealer Bank.
- Long-Term Loans: Must be approved by the Bangladesh Investment Development Board (BIDA). The application process typically takes 3 to 6 months and involves several steps, including:
- Prescribed Application Form: Completing the application form with detailed information about the loan, its purpose, repayment schedule, and interest payment dates.
- Supporting Documents: Submitting comprehensive loan documentation (term sheet, facility agreement, and security documents), corporate documents (memorandum and articles of association, board resolutions), pro-forma invoices for imported equipment, and financial reports.
4. Post-Approval Assistance
Smooth Loan Management: Once BIDA approval is obtained, LegalSeba.com continues to provide support to ensure effective loan management:
- Repayment Facilitation: No additional permissions are required for the repayment of principal and interest once BIDA approval is secured. LegalSeba.com assists in facilitating timely repayments in accordance with the loan agreement.
- Ongoing Compliance: LegalSeba.com offers ongoing support to ensure that borrowers continue to comply with all regulatory and lender requirements. This includes regular monitoring, reporting, and advisory services to address any compliance issues that may arise during the loan tenure.
By leveraging LegalSeba.com’s expertise, businesses can navigate the complexities of securing foreign loans with confidence, ensuring full compliance with regulatory requirements and lender criteria, ultimately enhancing their access to international funding opportunities.
How to get approval for the foreign Loan in Bangladesh
Pursuant to the regulations set forth by the Bangladesh Investment Development Authority (BIDA), any entity seeking to secure foreign currency loans for the purpose of importing capital goods for new projects, or for the replacement or expansion of existing production facilities, must obtain prior approval from BIDA. This encompasses commercial loans, buyer’s credit, and supplier’s credit. It is imperative to note that permission is strictly not granted for utilizing foreign loans as working capital.
Approval Process for Foreign Loan Applications
The Scrutiny Committee on Foreign Loan/Supplier’s Credit holds the authority to grant approval for availing foreign loans. Applications must be submitted to BIDA utilizing the prescribed form, accompanied by the following supporting documents:
- Certificate of Incorporation and Certificate of Commencement issued by the Registrar of Joint Stock Companies & Firms.
- Certified Copy of the Memorandum and Articles of Association of the applicant company.
- Registration Certificate from BIDA.
- Term-sheet, Loan Memorandum of Understanding (MoU), or Loan Agreement between the lender and borrower, detailing the repayment period, comprehensive schedule, grace period, and the calculated effective rate of interest.
- Board Resolution concerning the proposed borrowing.
- Feasibility Report of the investment project.
- Financial Analysis, which must cover:
- Internal Rate of Return (IRR)
- Break-even Point
- Debt-Equity Ratio of the project
- Debt-Service Coverage Ratio, analyzed for both base and sensitive cases
- Relevant Equity Forms and an undertaking from the sponsors/directors, duly completed for the collection of the Credit Information Bureau (CIB) report.
- Bank Certificate confirming the indebtedness or creditworthiness of the borrowing company and its sponsors, based on the latest CIB report.
- Certificate from BRTC or BUET, validating the quality, price, and economic life of the capital machinery to be imported (specific to supplier’s credit).
- Encashment Certificate, C-Form, and Bangladesh Bank Report obtained from the authorized dealer.
- Utilization Report of the subject loan with appropriate banking documents.
- Equity Encashment Certificate of the project, supported by relevant banking documents.
- Credential Documentation of the sponsors.
- Track Record of Foreign Borrowing.
Application Processing and Online Service
Applications for foreign currency loans are to be processed through BIDA’s Online Service System (OSS) platform, accessible at https://bidaquickserv.org/.
Exemptions for Foreign-Owned Projects in EPZ
Foreign-owned investment projects (100%) situated within Export Processing Zones (EPZ) are permitted to obtain foreign currency loans from overseas financial institutions or entities without requiring prior approval from BIDA or Bangladesh Bank (BB).
Evaluation Criteria
Applications shall undergo rigorous examination based on the following criteria:
- Commercial viability of the project
- Indebtedness and creditworthiness of the borrower
- Repayment period
- Debt-equity ratio
- Quality, price, and economic life of the procured capital machinery and equipment
Priority is given to medium to long-term borrowing.
Final Approval by Scrutiny Committee
Once applications have been meticulously scrutinized, they are forwarded to the Scrutiny Committee, chaired by the Governor of Bangladesh Bank (BB), for final approval.
Additional Documentation for the Power Sector
For projects within the power sector, the following additional documents are required:
- Letter of Intent
- Implementation Agreement
- Power Purchase Agreement
Above guidelines provides a comprehensive and formal overview of the requirements and process for obtaining foreign currency loans under the regulations of BIDA.
Why Choose LegalSeba.com?
- Expert Guidance: Our team has extensive knowledge of the regulatory landscape and lender requirements for foreign loans in Bangladesh.
- Comprehensive Support: From initial application to post-disbursement reporting, we provide end-to-end assistance.
- Customized Solutions: Tailored services to meet the specific needs of each client, ensuring a smooth and compliant loan process.
- Proactive Monitoring: Regular updates and proactive support to address any issues before they become problems.
Contact Us
For more information on how LegalSeba.com can assist you with obtaining and managing foreign loans in Bangladesh, please contact us at:
- Phone/Whatsapp: +8801753718223
- Email: [email protected]
Let LegalSeba.com be your trusted partner in navigating the complexities of securing foreign loans in Bangladesh. Our expertise and comprehensive services will ensure your business has the financial support it needs while remaining fully compliant with all regulatory requirements. Contact us today to get started.
