Short-Term Working Capital Loans from Abroad for Bangladeshi Companies

 

Foreign investors and businesses operating in Bangladesh can access short-term foreign loans under specific regulatory conditions set by Bangladesh Bank. These loans are particularly beneficial for companies needing immediate financial support for working capital or operational expenses. The regulatory framework has undergone revisions to accommodate foreign-owned manufacturing and service enterprises while ensuring financial stability and compliance with the country’s foreign exchange regulations.

Foreign-owned or controlled industrial enterprises in Bangladesh can now access short-term, interest-bearing loans from their parent companies or shareholders abroad, as governed by Paragraph 9, Chapter 15 of the Guidelines for Foreign Exchange Transactions-2018, Volume 1. This provision allows these enterprises to meet urgent business needs with greater financial flexibility. LegalSeba.com provides comprehensive services to ensure compliance with these regulations and streamline the borrowing process.

Securing Short-Term Loans

LegalSeba.com facilitates the acquisition of short-term loans, offering guidance and assistance to secure interest-free loans for up to one year from parent companies or shareholders abroad. These loans are specifically designed to address urgent short-term business needs, excluding input procurement, for which local working capital financing is not yet arranged. By leveraging our expertise, businesses can quickly secure the necessary funds to maintain operational stability.

Eligibility for Short-Term Foreign Loans

Previously, interest-free short-term borrowing from parent or affiliated companies was permitted. Under the current regulations, the following conditions apply:

1. Manufacturing Industries:

• Interest-free short-term loans (up to one year) are allowed from overseas parent or affiliate companies if deemed urgently necessary.

• Foreign-owned manufacturing enterprises can avail short-term foreign loans for working capital purposes for up to three years from the date of commencement of manufacturing operations.

• Interest on such loans is payable in Bangladeshi Taka (BDT) at the prevailing three-month Taka term deposit rate, as determined by the respective Authorized Dealer (AD) banks.

• Upon maturity, repayment of the principal amount and accrued interest shall be converted into the currency of the loan source country based on the prevailing exchange rate at the time of repayment.

2. Foreign-Owned Service Enterprises (Excluding Trading Businesses):

• As per Bangladesh Bank’s Foreign Exchange Circular No. 4 (dated January 19, 2021), foreign-owned service sector companies (excluding trading businesses) are now also eligible for short-term borrowing.

• These entities may obtain convertible foreign currency loans for a maximum period of six years from the date of commencement of operations.

• Interest on such loans is capped at 3.0% per annum.

 

Regulatory Compliance and Approval Requirements

• Unlike long-term foreign loans, Bangladesh Bank’s prior approval is not required for obtaining or repaying short-term foreign loans.

• However, companies must report the acquisition and repayment of such loans to the relevant authorities to ensure transparency and regulatory compliance.

 

Exemptions for EPZ-Based Foreign-Owned Companies

Foreign-owned (100%) investment projects located within Export Processing Zones (EPZs) are permitted to secure foreign currency loans directly from overseas financial institutions without requiring prior approval from BIDA or Bangladesh Bank. This streamlined regulatory framework ensures a structured approach to foreign borrowing, safeguarding economic stability while facilitating international investment in Bangladesh.

 

To learn more about the Foreign Joint Venture Company Operation in Bangladesh, [visit here]

 

Interest Payment Compliance

Ensuring compliance with interest payment regulations is crucial for businesses. LegalSeba.com assists in managing interest payments on short-term loans, adhering to the following guidelines:

  • Interest Payment in Taka: Interest on the Taka proceeds of the loan is payable in Taka at the prevailing 3-month interest rate for Taka term deposits, as applied by the Authorized Dealer (AD) on the loan encashment date.
  • Accrued Interest Calculation: We ensure accurate calculation of accrued interest on the short-term loan, ensuring it aligns with regulatory requirements.

Repayment and Repatriation

LegalSeba.com streamlines the repayment and repatriation process to ensure compliance and efficiency:

  • Conversion and Repatriation: We manage the conversion of principal and accrued interest into the currency of the source country at the prevailing exchange rate and facilitate their repatriation accordingly.
  • Tax Compliance: We ensure that all applicable taxes and duties are deducted and paid in accordance with regulatory requirements before the repatriation of funds, ensuring full compliance and minimizing any potential legal issues.

Loan Facility Duration and Renewal

Managing the duration and renewal of short-term loan facilities is critical for sustained financial health. LegalSeba.com offers support in:

  • Maximum Duration: We ensure that short-term loan facilities from parent companies or shareholders abroad are utilized for a maximum period of three years from the inception of manufacturing activities.
  • Renewal and Extension: We facilitate the renewal or extension of the short-term loan within the permissible three-year period, ensuring continued financial support and operational continuity.

Ongoing Compliance

Maintaining compliance with all relevant regulations and guidelines is paramount. LegalSeba.com provides ongoing support to ensure adherence to regulatory requirements:

  • Regulatory Updates: We keep our clients informed of any updates or changes in the regulatory framework that may impact their borrowing or repayment processes.
  • Due Diligence: We conduct thorough due diligence to ensure all transactions and processes comply with the relevant regulations, providing peace of mind to our clients.

By offering these comprehensive services, LegalSeba.com ensures that foreign-owned or controlled industrial enterprises in Bangladesh can efficiently manage short-term loans from their parent companies or shareholders abroad. Our expertise in navigating the complex regulatory landscape ensures that all transactions are conducted smoothly and compliantly, allowing businesses to focus on their core operations without the added burden of regulatory compliance concerns.

Why Choose LegalSeba.com?

  • Expertise in Foreign Exchange Regulations: Our team has in-depth knowledge of the regulations governing short-term working capital loans from abroad.
  • Comprehensive Service: We offer end-to-end assistance, from securing the loan to ensuring compliance with interest payments, repayment, and repatriation.
  • Efficiency and Accuracy: We streamline processes to minimize administrative burdens and ensure timely and accurate compliance.
  • Customized Solutions: Our services are tailored to meet the specific needs of each client, ensuring compliance and maximizing efficiency.

Contact Us

For more information on how LegalSeba.com can assist you with short-term working capital loans from abroad and ensure regulatory compliance in Bangladesh, please contact us at:

📞 Phone/WhatsApp: +8801753718223
📧 Email: [email protected]
🌐 Book A Meeting: LegalSeba.com/book-now

Let LegalSeba.com be your trusted partner in navigating the complexities of securing and managing short-term working capital loans from parent companies or shareholders abroad in Bangladesh.