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Raising money from your business assets

Raising credit and finance in Thailand is tough. If you have a new business, banks will generally not wish to take credit risk until you have a proven track record of revenues to support any credit you take. Even then, credit will be subject to various conditions which may even include lodging land title as security (if your company happens to own land) or actually depositing permanently the amount of credit you wish to take in the bank’s custody – effectively defeating the purpose of taking credit.

On 1 July 2015, the majority of various provisions of the Business Collateral Act (BCA) came into effect. The BCA was drafted by Government to try to help Small Medium Enterprises (SME) in Thailand to raise finance. There is also a wide attempt to try and limit the number of private ‘loan shark’ style arrangements often taken by business people who experience cash crunches but cannot obtain credit under the invariably inflexible, but highly profitable, banking system.

The BCA provides a different way for businesses to leverage finance. The borrowers (the security providers) can now use deposit accounts, inventories, machinery, intellectual property, trademarks and the like as security.

Lenders (the security takers) can now register this arrangement at the Business Collateral Registration office. The contract between the borrower and lender is enforceable and binding only after it has been executed and registered.

Some knowledgeable readers may wonder how the BCA is different to the previous ‘micro-finance’ and ‘nano-finance’ policies of Thai Government and banks of the past. Under those schemes, borrowers simply didn’t have any security but the limits for borrowing were set at 200,000THB for micro-finance and 100,000THB for nano-finance.

Under the BCA, there is no ‘credit limit’. The limit relates to the value of the security in commercial practice.

At the moment, the fees for registration of the collateral contract are unknown, as the fees have not yet been published in the Government Gazette.

This process should be beneficial to those persons who wish to borrow or lend and would prefer some security which is identifiable and registrable, when the borrower doesn’t have land, or the lender simply cannot take security over land – or does not wish to.

Another advantage of the procedure under the BCA is that enforcement of the security is also meant to be faster. It is stated in the BCA and supporting implementing regulations that, in the event of default, a judge must ‘immediately’ arrange for a trial date and the proceedings will be conducted continuously until the civil hearing is completed. This is very interesting, as the courts of Thailand are well known to be overloaded with cases at present, thereby making swift justice difficult.

If the BCA achieves what it is meant to, then there will be better opportunities for businesspeople to make arrangements to develop their businesses and for those that are wlling to help to obtain better protection and enforceable security. This would reduce, one might think, the ‘back of an envelope’-style loan agreements that often pass the desks of lawyers.

 Contact info:

Hughes Krupica Consulting (Bangkok) Co. Ltd

Phuket Office:
23/123-5 Moo 2, Kohkaew Plaza, 
The Phuket Boat Lagoon, Tambon Kohkaew, Amphoe Muang, Phuket 83000
Tel:+66 76 608 468 

Bangkok Office:
179 Bangkok City Tower, Fifth Floor,
South Sathorn Rd, Sathorn, Bangkok 10120
Tel: +66 2 872 173

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