BoT alters SME group definitions for soft loans

BoT alters SME group definitions for soft loans

The Bank of Thailand has redefined the eligibility of small and medium-sized enterprises (SMEs) business groups for its soft loan programme by splitting up smaller details and entities, an attempt to facilitate better loan access and increased loan amounts.

The regulator defines an SME business group, one of the criteria for loan approval, by separating individual relationships from a legal entity.

Effective on Jan 1, the definition of an SME business group will cover legally married husbands and wives as individuals seeking loans, while only taking a parent company, which has shares exceeding 50% in a subsidiary, into account for corporations looking to obtain loans.

The existing definition allows loan approvals for individuals by assessing the relationships between people who are closely related and can be interpreted as providing credit to the same person.

For corporate borrowers, the existing definition for loan approval takes into account all associated companies.

For a loan that falls under the definition of both an individual and a corporation, a relationship between individuals and juristic persons will not be accounted for, effective on Jan 1. The existing definition takes into account the relationship between shareholders and juristic persons.

The redefinition is aimed at providing the soft loans to businesses who have yet to receive this financial assistance or are seeking additional liquidity.

For instance, an SME business owner that may be a legally married husband and wife, will be defined as an entity eligible for soft loans not exceeding 500 million baht. If this couple runs an SME business group and a parent company has more than a 50% stake in its subsidiaries, the SME will be eligible for another batch of the 500-million-baht soft loans.

If one of the subsidiaries holds more than 50% shares in another affiliate firm, the former will also be allowed to obtain another batch of the 500-million-baht soft loans.

An entity can apply for the Bank of Thailand's soft loan programme with a maximum credit line of 500 million baht, but no more than 20% of the existing outstanding loans as of Dec 31, 2019.

Effective on Jan 1, the central bank will allow SME borrowers to apply for additional soft loans twice through the programme's duration from the existing one time.

However, the total soft loan amount will not be higher than 20% of the existing outstanding loans per borrower. SME borrowers can apply for additional soft loans and financial institutions will have to submit their loan requests for the central bank by April 18, 2021.

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