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Chile: New law to boost SMEs

SOME 50,000 small- and medium-size companies in Chile will benefit from a proposed new law that will make it much easier for companies to switch bank lender, according to banking experts.

The Chilean congress is poised to pass legislation that will create a central register of collateral used by SMEs to take out credit.

Small companies have to pay an upfront tax of 1.6% of the loan amount, known in Spanish as impuesto timbres y estampillas, every time they take out a new loan (including when they switch lender). Furthermore, every lender has a separate register of the collateral (perhaps land or a house) used against the loan.

Under the new scheme – expected to come into effect in mid-2007 – companies will be able to register the collateral centrally with a new government agency and will only have to pay the tax once, even if they change lender. The government also plans to reduce the tax to 1.2%.

Arturo Tagle, senior vice-president of planning and administration of Banco de Chile, says: “Small companies have been pushing for these changes for a while. It should make the banking system more competitive and dynamic.

“SMEs will also benefit because every time they wish to switch lender they have to pay lawyers a fee to study the title deeds so that the collateral can be registered with the new lender.

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