Chile has a range of locally available financing alternatives through both the banking sector and government agencies. However, the amount of money available for financing is limited, particularly in the case of large investment projects. In these cases, investors are recommended to use other alternatives such as syndicated loans, bonds, or financing through foreign organisations. International loans are subject to a tax on interest paid, based on the level of debt incurred by the local company. Details of different options are listed below:
Your first port of call should always be to the Department of International Trade (DIT), who can advise and potentially provide financing though its UK Export Finance scheme where appropriate.
Foreign financing options available to investors in Chile include those provided by the Inter-American Development Bank’s (IDB) IDB Invest. IDB finances private sector projects in clean energy, agriculture, strengthening transportation systems, and expanding access to financing.
Meanwhile, the World Bank’s International Finance Corporation (IFC) provides financing to private sector companies with projects in sectors that have a high impact on economies. These include IT, health, infrastructure, education, communications, finance and the development of SMEs.
The investment options offered include equity and quasi-equity, direct loans, loans through intermediary banks, credit syndication and guarantees on financial instruments.
The Chilean financial system is the most solvent, stable, efficient and liberalised in Latin America. Despite this, financing alternatives for large investment projects are still rather limited. This means that it is advisable for such projects to seek financing through syndicated loans, the issue of bonds or credit from international financing organisations.
Private banks handle nearly all corporate business. In general, medium to long-term financing is available from Chilean commercial banks, which offer many of the asset and liability products available in international financial centres. Corporate lending is focused on medium-sized businesses due to restrictions on the proportion of a bank’s assets that can be lent to each customer. Firms requiring large amounts of credit usually must resort to international sources.
Chile’s Economic Development Agency CORFO, is the state agency that promotes economic development in Chile by encouraging competitiveness and investment. It offers various financial products available to the business community (mainly to SME’s) including long-term financing loans, risk capital, micro loans, factoring, non-payment warranties and co-financing options. CORFO offers attractive financing options for high-tech companies, especially those looking to invest outside of Santiago or in renewable energies, through its High-Technology Investment Program. The organisation allocates funds through commercial banks in Chile whose specialisation allows greater efficiency in their distribution.
In 2010 the government launched an innovation incubator called Start-Up Chile which aims to strengthen Chile’s entrepreneurship culture while positioning Chile as Latin America’s innovation hub. It offers:
● CLP 25 million in funding for entrepreneurs to set up their business in Chile, with an additional CLP 25 million available for further funding.
● Acceleration program and access to national and international corporate networks, investors, mentors, and global partners to scale to new markets.
● A one-year working visa for foreign teams, as well as free coworking space.
● Access to the Start-Up Chile community which includes up to USD $300,000 in perks such as AWS, Hubspot, Microsoft and more specific ones such as legal, accounting, hiring, design, marketing and more.
To date, Startup Chile has funded 2,363 start-ups, 5214 entrepreneurs supported from 88 nationalities, and which have a market valuation more than US$1.4 billion.
● Fundación Chile is a private, public-private partnership whose purpose is to promote Chile’s transformation towards sustainable development. Via its risk capital fund ChileGlobal Ventures, the agency provides co-financing to companies in agro business, marine resources, human capital, education, and environment.
Payment to suppliers is often made via an irrevocable letter of credit (ILC) from a Chilean commercial bank to the supplier. This is fast and simple, with no lengthy delays in the remittance of foreign currency. Payments are made upon receipt of notice of shipment of goods. UK Export Finance (UKEF) can assist UK exporters in providing a letter of guarantee to the Chilean bank issuing the ILC, thereby preventing the exporter from having working capital or other collateral tied up overseas.
Other methods of payment to suppliers include cash against documents and open accounts. Suppliers dealing in open accounts usually must develop a long-standing relationship with the buyer.