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Does a foreign lender need an Israeli license to lend money to Israeli businesses?

Frequently yes. The Supervision of Financial Services (Regulated Financial Services) Law 5776-2016 requires a license to provide credit as a business in Israel, and the obligation attaches to the activity rather than to the lender’s nationality. A single loan between commercial parties is not a licensed activity, but a foreign fund that lends repeatedly to Israeli borrowers can fall inside the regime. Banks and supervised institutional bodies sit outside it. Lending without a required license is a criminal offense and can cost the lender its contractual interest.

The 2016 Law built two license tiers, a basic license and an expanded license for larger providers, both issued by the Capital Market, Insurance and Savings Authority. The trigger is providing credit by way of business, and the Authority weighs the frequency of the lending, whether the lender markets itself to the Israeli public, and whether interest or fees are charged. Licensed lenders also carry disclosure duties and are bound by statutory caps on the total cost of credit. Courts have treated the licensing requirement as protective legislation, which is why an unlicensed lender risks losing the interest component of its claim.

A foreign lender financing one Israeli acquisition, or a parent advancing a shareholder loan to its own Israeli subsidiary, is not usually caught. Three practical points follow for anyone lending into Israel. Document the facility in writing and keep evidence that it was a one-off commercial transaction. Register any security taken over an Israeli borrower’s assets with the Companies Registrar within 21 days of creation, because an unregistered charge is void against a liquidator and other creditors, as explained in the guide to charges over Israeli company assets. Check the withholding tax rate on interest paid abroad before the first payment date.

⚖ In Practice
  • Governing law: Supervision of Financial Services (Regulated Financial Services) Law 5776-2016, Chapter B; Companies Ordinance [New Version] 5743-1983 on charge registration
  • Competent authority: Capital Market, Insurance and Savings Authority (Rashut Shuk HaHon, Bituach VeChisachon)
  • License tiers: a basic license for smaller providers and an expanded license once the credit portfolio passes the threshold set by regulation
  • Charge registration: security over an Israeli company’s assets must be filed with the Companies Registrar within 21 days of creation
  • Exposure: unlicensed credit provision is a criminal offense and exposes the lender to financial sanctions and to loss of contractual interest

From the full guide: Creating a Charge Over Israeli Company Assets: Registration, Priority, and Enforcement for Foreign Lenders

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Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

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