How to Get Funding for Small Businesses in Thailand

If you've been thinking about starting your own small business in Thailand, one of the first questions that must be answered is about financing for your business. This is one of the first and probably the hardest hurdles to get over in the beginning. If you have sufficient backing through investors or property that you can use as collateral, then the job becomes much easier. 

Do You Have Collateral? 

Before speaking to a bank or lender about a loan for your new small business, be sure to have all your paperwork in order including your business plan. Being prepared is one of the keys to success. If you are planning to leverage one of your investments or collateral, then make sure you have a clear deed to this or other proof of ownership. 

Seek Financing in Your Country of Origin 

In Thailand mortgage lending for foreigners has traditionally been very difficult. In spite of the shift in policies in recent years, financing for a small business can be difficult for foreigners. Due to this fact, many professionals recommend that foreigners acquire their financing in their home country before coming to Thailand to set up their business. 

Get Help from Local Consultants 

The Thai government is working now to make it easier for foreigners coming to Thailand in order to encourage economic growth. Due to the restrictions concerning foreigners owning property, many financial professionals suggest getting help from a local consulting company in Thailand. Local financial consultants offer clear direction and innovative ideas when it comes to being able to get funding for your small business. They can help you put together all of the viable documents and information you will need. 

Working with Thailand's Major Banks 

In the last 10 years, Bangkok Bank began offering offshore financing to foreigners who wished to purchase real estate in Thailand. Borrowers can get up to 70% of the property's value. A few of the requirements for these loans include documents that prove your annual income, such as a letter of employment and a business plan. 

United Overseas Bank (UOB) in Singapore now offers similar programs to foreigners seeking to purchase real estate in Thailand. In every situation an application fee is required along with other miscellaneous fees and charges. Be sure to ask about these before signing any final paperwork. You must also meet in person with a bank officer to discuss your loan. That means that you must be in Thailand at the time of initiating your loan application. 

Steps to Guaranteed Bank Loans as an Expat

Securing finance for a property is a daunting prospect for most people, even in their native country. Therefore, getting a bank loan for a property in Thailand fills most of us with a sense of dread, especially if we believe all the misinformation that proliferates the internet. “Thai banks don’t give mortgages to expats.” “Thai banks only loan to expats if they have a Thai spouse.” Well, guess what? Getting a mortgage in Thailand has never been easier, as long as you follow some simple guidelines and have realistic expectations. The following article guides you through what you need to consider and complete, to guarantee securing a bank loan for your dream property.

When purchasing a property, finance is the first thing that needs to be taken into account, before you even start the search for your dream home. For those of us not lucky enough to have sufficient funds to pay cash for a property, the banks are usually the first place we turn to for financing. In Thailand, obtaining a mortgage as an expat has, until recently, been extremely difficult if not impossible. However, in recent years attitudes have changed as the Thai government has tried to encourage banks to be more open to promoting economic growth and expanding tourism in line with AESAN economic philosophies and the onset of the AEC in 2015. There are still some strict criteria in place, due to the recent world economic crisis, and banks being more aware of the need to protect their assets. However, obtaining a mortgage in Thailand has never been easier, as long as you follow some basic rules.

Understand Your Requirements

Before you even start looking at what properties are on offer in the market place, you need to know exactly what finance you want and look for a product that best suits your requirements. You need to ask yourself, how much you want to borrow, how quickly you want to pay the loan off and how much you can reasonably afford to pay back each month. Most banks will not lend 100% of the property value. Typically, they will lend 70-80% of the cost, which also needs to be taken into account.

Assess Your Financial Status

When applying for a mortgage there are non-refundable fees levied to your application, which vary between banks. You, therefore, want to ensure that you have carried out a thorough check of your finances to avoid wasting money. Contact the National Credit Bureau and ask for a credit check, to avoid any surprises. You will need to submit a copy of their report when applying for a mortgage anyway. Carry out a full review of your finances to understand what regular expenses and commitments you have to ascertain what disposable income you have available each month to repay the mortgage. You will also need to provide a deposit of between 20-30% as most banks will only lend between 70-80% of the property value.

Research All Available Options

Use the internet or better still, make an appointment to see the bank in person to see what loan options are available, and what the terms and conditions are for each product. They do vary considerably from bank to bank. Loan terms for example, are a maximum of 7 years with some banks, whereas others stipulate the applicant must be less than 60 years of age when the loan terminates. Most banks insist that the applicant must earn 3 times the amount of monthly loan repayment. These restrictions need to be taken into account when determining how much you can afford and how quickly you want to pay the loan off. Additionally, when buying a property, it must be held in your own name and registered as a condominium under the condominium act and the condominium units owned by a foreigner cannot exceed 49% of the project.

Prepare the Documentation

The documentation required by each bank is extensive and varies slightly between banks. Create a checklist of all the documentation required by the bank for inclusion with the mortgage application and other loan application criteria that must be met. Typically a bank will require the following:

Documentation:

• A completed application form.
• A copy of your I.D card/Passport including essential visa pages.
• A signed copy of your sales and purchase agreement or reserve agreement.
• A reference letter from your existing bank, confirming accounts held and value of deposits and loans you have.
• Six months of banks statements.
• A Credit Bureau Report from your country of residence.
• A letter from your employer, confirming your position, length of service, salary and last two years of income tax returns and last six months of computerized payslips.
• If self-employed the balance sheet and profit and loss statements from the last two years.

Criteria:

• You will be under 60 years of age when the loan period finishes.
• Your monthly income is 3 times greater than the value of the monthly loan repayment.
• You have a 1 year work permit or Thai resident permit.

Patience

Thailand is no different from any other country when it comes to obtaining a mortgage - it takes time. The bank need to carry out due diligence to ensure that you are a good investment risk. The checks they need to make take time, as they are reliant on multiple third parties to provide them with information. When you initially discuss your mortgage with the bank, you should ask about the timescales for loan approval. You can then set your own expectations and that of the property seller/developer. However, it is always advisable to build in some slack to any dates provided. You can help by ensuring that you understand, assess and research the options available. Ensure you meet the individual bank’s requirements and provide all the required documentation as early as possible.

Loans for Foreigners in Thailand

Financing and debt are some of the most popular forms of financial vehicles today. In fact, financing is almost always connected to buying a new property, whether the buyer has sufficient funding on their own or not, and can be thus seen as a means of leveraging investments.

Not surprisingly, Thailand offers similar services to those in the Western world. Most financial institutions in Thailand provide loans for real estate purchases to local Thais and Thai companies and the situation is getting increasingly better for foreigners, as well.

What was unheard of some time ago is now becoming a norm and foreigners are provided some (albeit limited) access to financing. The main reason behind the government’s change of heart on this matter was partly its intention to promote tourism and to encourage economic growth in Thailand. Although banks and other institutions offer financing services to outside foreigners, their conditions can be somewhat strict, for example, acquired condominium has to be registered as a condominium under the Condominium Act etc.

Local Financing

Thai nationals can enjoy the benefits of personal loans for a variety of purposes. This type of financing usually takes many shapes and forms and ranges from credit cards through business loans to personal loans for education, medical treatment or general use.

Should a foreigner be found eligible to obtain a local bank loan, they must first meet the following criteria:

• Possess a valid work permit for at least one year (or hold permanent residency)
• Proof of employment in Thailand and annual salary (including pay slips)
• In some cases, banks may require employer’s company documents
• Pass a credit check
• The applicant’s age combined with the loan period must not exceed 60 years
• Must have a stable and secure job
• Total income must be at least three time higher than each instalment
• The aggregate amortization of loan must exceed 7 years (for some banks)

Interest rate on local bank loads tends to be fixed and varies from bank to bank. Apart from local options, foreigners may also take advantage of international schemes provided by Bangkok Banks’s Singapore branch and UOB (both of these are aimed at financing real estate purchases).

Mortgage

Foreigners are also able to obtain mortgages that are governed under the Thai Civil and Commercial Code. In order to qualify for protection under the Thai law, the following conditions must be met:

• The mortgager must have the right of ownership of the property
• The mortgage contract must be in writing and must be registered
• The parties must register the mortgage to the authorized Officer for the following cases:
• Land with title deed has to be registered at the Land Department, Bangkok Metropolis Land Office (Branch), Provincial Land Office or Provincial Land Office (Branch) where the land being mortgaged is located
• Land with no title deed has to be registered at the District Office where the land being mortgaged is located