SME OVERSEAS LOAN

Before you decide whether in Singapore or overseas, you may want to consider:

(i) Track record
Banks assess credit worthiness based on the years of operations in a particular country. If your company is a new set-up, you will likely find it difficult to borrow onshore in country of operation.

(ii) Interest Rates vs Foreign Exchange Risk
Interest Rates and Foreign Exchange Risk should be reviewed together. Interest rate is the cost of borrowing while Foreign Exchange rate is applicable when 2 currencies are in play. If the currency of your source of repayment (e.g. receivables) differs from your currency for your borrowings, then foreign exchange rate will come into play when it comes to converting one currency to another to repay your borrowings. Hence, you should weigh between FX volatility and interest rate savings.

(iii) Ease of remittance for loan repayment
If you need to remit funds overseas for loan repayment purposes, you need to check local regulations and requirements on remittance to said country. In most countries, interest payments relating to overseas indebtedness may attract withholding tax.

If you are a minority shareholder and have no management control over the joint venture, it is financially prudent not to take on the indebtedness of this joint venture’s entity under your Singapore’s entity.

OCBC group’s core markets include Singapore, Malaysia, Indonesia, China and Hong Kong. We also have branches in Myanmar, Thailand, Vietnam, Taiwan, South Korea, USA and United Kingdom.

You may want to consider:

(i) Your Product

• What is your unique selling proposition (USP) vs incumbent competitors?
• Do you need to localise your products and service offerings in consideration of culture and demography of the target market?
• Financial viability taking into account of value chain including logistics / distribution costs in the market

(ii) Your Resources

• Expanding overseas require time, money and manpower. Do you have trusted person(s) to help manage your business if you are not able to devote a large part of time there? 
• Set up cost may take some time (years) to recoup – are you able to fund the expansion from your cashflow or bank borrowings without affecting your existing business?

(iii) Local Laws and Regulations

• It is important to know the general regulations (e.g. remittances and foreign exchange restrictions, customs and taxes) and industry specific ones especially your business falls under the target country’s “restricted” or “protected” industry.
• Other than researching on the available talent pool, you need to be aware of labour law in the target market.

(iv) Market Entry Strategies

• You can consider strategic partnerships with other companies, check if there is any franchise option,  negotiate for an exclusive appointed distributorship or placing the product or services through e-commerce platform.
• You may require professional consultants like lawyers, tax planner and/or local partner that can help you navigate bureaucracy and red tapes, bring you up to speed on business cultures, overcome language barriers

If you have further enquiries, please get in touch with us and we will assist you.