We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What Is External Commercial Borrowing?

Mary McMahon
By
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

External commercial borrowing is a process companies within India can use to access foreign sources of funding. It is necessary to follow some specific protocols in the application process, and companies may only use the money for certain specified purposes. Companies can raise their own funds, or turn to an agent to assist them with locating financial opportunities. The government regulates external commercial borrowing in the interest of maintaining economic health and welfare.

Foreign funds can be provided in the form of loans, credit, bonds, and other financial instruments. A company in need of external commercial borrowing may need a large amount of money or may have an interest in expanding operations. It is not legal to use the money in speculative activities like investing in the stock market, and the company must be able to show how it will apply the funds when it seeks financial assistance.

Buyers and suppliers alike can use external commercial borrowing to expand their operations and provide more services to customers. For buyers, the external funding may provide an opportunity to sell more goods and services to the public. This will allow it to grow, and it can repay the borrowed funds through its enlarged business activities. Suppliers may also rely on external funding to increase production and attract more potential customers.

Companies with an interest in external commercial borrowing can meet with financial advisers to get information about the available opportunities and how to apply. In a growth economy, it can be easy to locate foreign investors with an interest in Indian companies, but it is important to compare sources of funding. A company may be able to negotiate a better deal if it investigates its options thoroughly and is willing to bargain. Financial institutions can provide assistance with locating funds that may not be available through other sources.

The rate of external commercial borrowing is a topic of interest to the government. It monitors lending and borrowing and provides reports, usually available to members of the public. These reports can be useful for determining the overall direction of the economy, as well as researching specific companies or sectors. A sector where borrowing is active is likely to be in a state of growth, for example, and could be a sound investment. In sectors where borrowing is on the decline or defaults are high, investors may be less interested, as the risks would be much higher.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.