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El Salvador: Financing for small businesses

Thursday, October 10, 2013

Small and medium enterprises will find it easier to get a bank loan, following approval last month of the Law on Guarantees of Movable Property (Ley de Garantías Mobiliarias).

Under the law, a small business can guarantee a loan with various kinds of fixed assets, as well as intangible property, which would be acceptable to a financial institution, which would in turn translate into a reduced credit risk and lower financing costs for the business.

An online registration for this type of guarantee will let the lender file a lien on the debtor’s property, such that other potential lenders know whether or not an asset has a previous encumbrance.

The system will allow registration of physical assets, such as equipment.

vehicles and inventory, as well as intellectual property, such as trademarks.

Currently, obtaining bank credit is often difficult for small businesses, which do not have real property, with which to secure the loan.

The new regime provides for an expeditious settlement disputes, through notarial procedures, arbitration or litigation.

The law will come into force six months after its publication in the Official Gazette, once the President has signed it. 

For more information, please contact Diego Martin at [email protected] or 503-2209-1600