Guarantees and SMEs

The new law on security interests promises small and medium-sized companies quick access to credit lines, as it simplifies procedures for constituting and executing guarantees.

Monday, February 12, 2018

Last week the Congress of the Republic, approved amendments to the Law on Secured Transactions that has existed since 2007 to facilitate access to bank loans. With the modifications, any transaction that has the effect of guaranteeing an obligation of the debtor with the creditor is typified as a security interest.   

This means that even a company's own inventory can be used as collateral: its agricultural products, livestock, machinery, equipment, accounts receivable or technological innovations.

From a statement issued by Agexport:

Benefits for micro, small and medium enterprises (mipymes): 

1.  The most direct benefit is the extension to MSMEs of access to credit through the registration of their personal property or possessions.

2.  Quick access to credit by simplifying the procedures for setting up, modifying, extending, extinguishing and executing guarantees

3.  A much more efficient credit market is generated because it allows the ability to have a more strengthened register where more banks, financial or cooperative companies, for example, that can finance MSMEs, may interact.

Read full release (in Spanish).

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More on this topic

Guarantees for Loans

February 2018

In Guatemala, companies will now have the option of accessing financing using their inventory, agricultural products, machinery, equipment and other assets as collateral.

The Congress of the Republic approved the reforms to Decree 51-2007, on the Law on Secured Transactions, which aims to regulate security interests in loans, non-monetary obligations, credit titles and titles representing merchandise, among other things. The changes will take effect one month after they are published in the newspaper Diario de Centroamérica.  

Nicaragua Approves Secured Transactions Law

October 2016

The law passed by the Legislature allows companies to use their personal property as collateral to take out productive loans.

From a statement issued by the National Assembly of Nicaragua:

During the plenary session on October 5, the National Assembly approved in general the Secured Transactions Law, a legal instrument to promote access to credit for micro, small and medium enterprises by putting up any movable goods used in their daily work as collateral.

Costa Rica: Law on Secured Transactions Approved

May 2014

Mortgage inventories, cash flow, contracts, intellectual property, trademarks, among others, can be used as an alternative option to traditional collateral on real estate.

Additionally, the law passed by the Legislature on April 30, also allows for current assets or rights given in contracts, equipment, accounts receivable, chattels, crops, tourist bookings and even future rights to the value of timber to be taken into account. The bill is awaiting the signature of the President of the Republic, and subsequent publication, and the issue of the relevant regulations by the General Superintendence of Financial Entities (SUGEF).

Honduras: Personal Guarantee Law

July 2010

The new law will allow lenders to accept personal property as a guarantee for loans.

The head of the Honduran Association of Banking Institutions (AHIBA), María Lidia Solano, told that, "movable guarantees are an instrument that can be used to give small and medium sized producers access to credit".

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