External borrowing for start-up companies, consider easing regulations

SBP considers easing rules and regulations for start-up companies to obtain foreign loans.

According to the working paper, the central bank can allow companies to obtain convertible debt from foreign countries, which can later be converted into equity.

The working paper states that a company can obtain a loan from abroad in the form of an exchange, meaning that the lender must have the option to convert the borrower’s debt into equity, but there are certain conditions.
The debtor company has been formed as a private limited public listed company under the Companies Act 2017. The company’s annual revenue since its inception should be less than Rs 2 billion, and its shares should be worth less than Rs 30 crore. This type of loan will mature in one to five years.

The original amount can be paid in bullet payment and advance payment will not be allowed. In meetings over the past year, representatives of start-ups and venture capital firms have voiced concerns that existing foreign exchange regulations do not meet the requirements of tech and start-up companies.

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