Business Loans For A Thai Company

[torrenova]

I want to ask about bank financing for a new Thai company given the following scenario. The company acquires the initial capital of Bt15m from overseas and is the vehicle for a non Thai beneficial owner.

Example

The new company buys the freehold (chanote) for 15m but hasn't enough cash left to develop the business. How easy would it be for a new business to go to the bank and raise say a 5m loan (at 33% current LTV and prospective forward 25% LTV) to invest in the business ?

A 5m loan even at 10% and over 10 years would have repayments of 66k a month which would be less than the rent payable on the property were the company to buy the lease, do the renovations and pay rent.

To me it is obvious that the sensible thing would be to purchase the property but if that takes up most of the available resources, how easy is it to get investment funds from a bank ? On the plus side is the low LTV but on the downside is the fact that the company is new.

Edited April 2, 2010 by torrenova

[CWMcMurray]

I am not sure about the different regs for companies, but wouldn't it be possible to buy the land with a mortgage? Finance the land purchase through the Bank with 70% down and mortgage of 30%?

If so, the Bank can hold the chanote to the land until the mortgage is paid off... this may be more interesting to them. (i.e. low risk for the Bank) and may also fit your purposes.

[phrae]

Most Banks in Thailand will not agree a loan to a new company, they will insist on you running the Company books for a minimum 2 Years.

Looking at what kind of Business it is (it looks like yours may be a Hotel ?), if this is the case you may apply for up to 5 Million Baht with the sme bank, they have a special tourist loan, this is the only bank that i am aware,will help you.

One hopes other readers can input into this, maybe they have had some success in the past

[Naam]

I want to ask about bank financing for a new Thai company given the following scenario. The company acquires the initial capital of Bt15m from overseas and is the vehicle for a non Thai beneficial owner.

The new company buys the freehold (chanote) for 15m..

legally not possible except foreign allocation condos.

[keestha]

In case the business is indeed a hotel as a previous poster suggested, the bank will want to see a business plan, and they would be much more likely to consider a loan if construction has already started.

Edited April 3, 2010 by keestha

[torrenova]

I want to ask about bank financing for a new Thai company given the following scenario. The company acquires the initial capital of Bt15m from overseas and is the vehicle for a non Thai beneficial owner.

The new company buys the freehold (chanote) for 15m..

legally not possible except foreign allocation condos.

I think I phrased that badly.

What I meant to say was that using different share structures and distribution classes, a Thai company with more than the requisite 51% Thai shareholding raises 15m from subscribers for their shares in share capital and deposits (how to officially deal with this yet to be determined but no need for 15m share capital paid up. Problem with loans is that it reflects on the total financing.

Anyway, you buy a building and land for 15m. You then have a company unencumbered by debt with a 15m asset but no trading history. Now I would have thought it not an earth shattering possibility to raise 5m from a bank. The bank would have a first charge over a 15m asset.

The option of putting it in the missus' name is a non starter !

[torrenova]

Most Banks in Thailand will not agree a loan to a new company, they will insist on you running the Company books for a minimum 2 Years.

Looking at what kind of Business it is (it looks like yours may be a Hotel ?), if this is the case you may apply for up to 5 Million Baht with the sme bank, they have a special tourist loan, this is the only bank that i am aware,will help you.

One hopes other readers can input into this, maybe they have had some success in the past

Just looked at that and thanks but the deadlines are 30/09/10 and that is not going to work.

In case the business is indeed a hotel as a previous poster suggested, the bank will want to see a business plan, and they would be much more likely to consider a loan if construction has already started.

Similar idea to a hotel. Numbers shown for examples only but total in the 10-30m range. Could be complete change of use or taking over a venture running in a similar vein.

The level of post purchase investment makes it almost impossible to go down the leasehold route. Yet I'm not a great advocate of having money tied up in buildings which provide a poor return. Were it only a small baht issue then sure, everything on a 3+3+3 or 15 year lease.

A business plan is no problem but I just want to know whether I could extend the purchase price limit nearer the financial boundaries for this project and then borrow back some of that from a bank. I'd rather do that than enter into any vendor financing. Also, I'm really not too sure how well a westerner would be able to put over a business plan to the Thai bank. Just who would you be talking to, in terms of their seniority and English language skills, when looking to raise 5-10m ?