Sub Loan Agreement Template for Indonesia

A Sub Loan Agreement is a sophisticated financing instrument that you'll encounter in complex Indonesian funding structures where money flows from an international lender through a local intermediary to reach your project or business. This three-party arrangement allows you to access international capital while ensuring compliance with Indonesian banking regulations and foreign exchange controls.

When do you need this document?

You need a Sub Loan Agreement when your project requires international funding but direct lending isn't practical or legally permissible. Development banks often use this structure to finance infrastructure projects through local Indonesian banks. Manufacturing companies seeking expansion capital from foreign lenders typically require this arrangement to comply with Bank Indonesia regulations. Property developers accessing international development finance for large-scale projects also rely on sub-loan structures. Additionally, you'll need this document when your business requires foreign currency funding but Indonesian banking law requires local bank involvement in the lending chain.

Key legal considerations

Your Sub Loan Agreement must carefully balance the terms of the primary loan with the sub-loan requirements. The document needs clear provisions addressing currency conversion risks, especially if the primary loan is in foreign currency while your sub-loan is in Rupiah. Security arrangements require particular attention, as you may need to provide security both to the intermediary lender and potentially to the primary lender. The agreement must include comprehensive representations and warranties covering both your business operations and compliance with Indonesian corporate law. Cross-default provisions linking your sub-loan to the primary facility create additional complexity that requires careful drafting. You should also ensure the document addresses reporting obligations to both the intermediary lender and relevant Indonesian regulatory authorities.

Legal requirements in Indonesia

Indonesian law requires your Sub Loan Agreement to comply with the Civil Code's contract formation principles and specific banking regulations under Law No. 10 of 1998. The document must satisfy OJK Regulation No. 40/POJK.03/2019 requirements for credit assessment and asset quality monitoring. If your agreement involves security over movable assets, it must comply with Law No. 42 of 1999 on Fiduciary Security, while real estate security requires adherence to Law No. 4 of 1996 on Land Mortgage. Foreign exchange considerations under Law No. 24 of 1999 become critical if your sub-loan involves currency conversion or if the primary loan is denominated in foreign currency. The agreement must also ensure the intermediary lender maintains proper banking licenses and regulatory approvals. Documentation should be prepared in Bahasa Indonesia with certified translations if foreign parties are involved, and you may need Bank Indonesia approval for certain foreign exchange transactions related to the financing.