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Commercial credit agreements under Mexican financial law

Credit agreements in Mexico are governed primarily by the Ley General de Títulos y Operaciones de Crédito (LGTOC), supplemented by the Ley de Instituciones de Crédito and sector-specific regulation from the CNBV. Foreign lenders and borrowers need to understand which credit type fits their transaction, how interest is priced, what instruments document the obligation, and which guarantees can be perfected and enforced. Getting these fundamentals right at the outset prevents costly restructuring or enforcement failures later. For the wider scope of our work, see our Financial Law practice page.

Related issues may require complementary legal analysis, depending on the transaction and operating structure.

Credit types under Mexican law

The LGTOC defines several distinct credit categories, each with its own legal mechanics and collateral requirements.

Term loan

A lump-sum disbursement repaid over an agreed schedule. The most straightforward structure for term loans. No revolving feature. Principal and interest repayment terms are negotiated freely—Mexican law imposes no mandatory amortization schedule and no interest rate cap.

Revolving credit facility

A revolving credit facility: the borrower draws, repays, and draws again up to the committed limit. Similar in function to a US revolving credit facility. Commonly used for working capital needs where disbursement timing is unpredictable.

Fixed-asset loan

Designed for fixed asset acquisition—machinery, equipment, permanent improvements to real property. A fixed-asset loan is automatically secured by the acquired assets and by the enterprise's existing and future fixed assets. The security interest attaches by operation of law, though registration at the RPP strengthens enforceability. Banks and SOFOM entities use this structure heavily for equipment financing.

Working-capital loan

Working capital financing tied to a specific production cycle. The law provides that this credit is automatically secured by the raw materials, inventory, and receivables generated by the production activity it finances. Commonly used in agriculture, manufacturing, and tourism hospitality. The automatic security attachment distinguishes this from a simple unsecured working capital line.

Interest rate mechanics: TIIE as the benchmark

Mexican law does not impose a single statutory interest-rate cap on commercial credit, although courts may scrutinize manifestly excessive rates. Commercial terms are otherwise negotiated by the parties. In practice, Mexican bank credits and SOFOM credits price off TIIE—the Tasa de Interés Interbancaria de Equilibrio published daily by the Banco de México.

TIIE is Mexico's primary short-term interbank benchmark rate, published each business day. Loan agreements typically specify the TIIE (28-day, 91-day, or 182-day version) plus a fixed spread. For example, a real estate construction loan might be priced at TIIE 28 + 450 basis points. As TIIE moves, the borrower's interest obligation adjusts accordingly.

Since Mexico transitioned away from LIBOR exposure, TIIE has become the dominant floating rate reference for all categories of peso-denominated commercial credit. USD-denominated credits from foreign lenders typically reference SOFR or a fixed rate.

SOFOM E.R. vs. SOFOM E.N.R.

Foreign investors frequently encounter SOFOM entities as lenders in Mexico. Sociedad Financiera de Objeto Múltiple (SOFOM) entities come in two regulatory tiers:

  • SOFOM E.R. (Entidad Regulada): Subject to CNBV supervision because of its ownership, activities, or securities-market status. It does not take bank deposits from the public.
  • SOFOM E.N.R. (Entidad No Regulada): Not subject to the same CNBV prudential supervision as a regulated SOFOM. It must register with CONDUSEF and comply with applicable AML and consumer-protection rules. Foreign investors sometimes establish SOFOM E.N.R. vehicles as lending platforms for specific portfolios.

Both can hold mortgages, take trust-based guarantees, and enforce security under the same legal framework as banks.

The Mexican promissory note: Mexico's primary credit instrument

In nearly every Mexican credit transaction, the borrower signs a promissory note governed by LGTOC Article 170 et seq. The instrument is:

  • Autonomous: Its obligation is independent of the underlying credit agreement. A holder can enforce it without proving the underlying deal.
  • Negotiable: It can be endorsed and transferred, which matters for loan sales and securitization.
  • Directly executable: A promissory note is an enforceable instrument (título ejecutivo) under Mexican procedural law, meaning a lender can proceed directly to attachment of assets without a full trial on the merits. This significantly accelerates enforcement compared to suing on a contract alone.

Best practice: the credit agreement and the promissory note are separate documents, both signed at closing. The promissory note is often held in escrow or with the lender's counsel, presented for payment at maturity or on default.

Guarantee menu

Mexican credit transactions use a layered guarantee structure. The most common instruments are the following:

  • Personal guarantee (aval): by a natural or legal person who signs the promissory note directly. The guarantor is jointly and severally liable as a co-obligor. Fastest enforcement because the promissory note is already executable.
  • Surety bond: Issued by an authorized surety company (regulated by the CNSF). Common in construction contracts and public contracts. Less common in bilateral bank credit but used as bid and performance security in project finance.
  • Mortgage: Real property security. Requires execution before a Mexican notary public and registration at the Registro Público de la Propiedad (RPP). Perfected upon registration. Judicial enforcement through a mortgage foreclosure action takes three to seven years in practice—the primary weakness of this instrument for lenders.
  • Nonpossessory pledge: Pledge over movable assets (equipment, vehicles, inventory, shares) without physical delivery of the collateral to the lender. Must be registered at the Registro Único de Garantías Mobiliarias (RUG) for priority and enforceability against third parties. More efficient than a physical pledge but still subject to judicial enforcement.
  • Mexican guarantee trust (fideicomiso de garantía): The most powerful security tool available in Mexico. Under LGTOC Art. 395, the borrower transfers assets into a trust administered by a CNBV-authorized trustee, with the lender as beneficiary. On certified default, the trustee can sell the trust assets extrajudicially—no court is required. Enforcement in three to six months versus three to seven years for a mortgage. Preferred structure for sophisticated lenders.

Cross-border credit: governing law considerations

A credit agreement between a foreign lender and a Mexican borrower can designate foreign law as governing law for the credit contract itself. New York law is common. However, security interests over Mexican assets—real property, Mexican shares, and receivables due from Mexican obligors—must be perfected under Mexican law regardless of what law governs the loan agreement. This split is normal and manageable with coordinated counsel in both jurisdictions.

Foreign lenders should also account for ISR withholding on interest (4.9% to 35% depending on lender jurisdiction and treaty status) and thin capitalization rules if the lender is a related party under LISR Art. 28 fraction XXVII.

Continue your legal review

Broaden the analysis with our guide to vendor financing and supplier credit structures under Mexican law.

Prepare for the next stage with cross-border financing in Mexico.

Explore the related legal considerations in loan restructuring and debt relief for corporate borrowers.

Continue with practical guidance on luxury real estate financing and mortgage options in Mexico for foreign buyers.

Frequently asked questions

Yes, with proper structuring. The loan agreement can be governed by foreign law. The challenge is taking security over Mexican assets and managing ISR withholding on interest payments. Many foreign lenders use a SOFOM E.N.R. vehicle or structure the credit through a Mexican subsidiary to simplify security perfection and tax treatment. Direct offshore lending is possible but requires careful attention to Banco de México FX documentation requirements and CNBV activity restrictions on foreign banks soliciting business in Mexico.

There is no single statutory cap for commercial loans between legal entities, but courts may scrutinize manifestly excessive rates. Commercial rates are otherwise negotiated by the parties. Consumer credit has separate protections under CONDUSEF regulation, but those do not apply to commercial credits to companies.

Banco de México publishes TIIE daily. The loan agreement specifies which tenor (28-day is most common) and adds a fixed spread. Each interest period, the rate resets to the then-current TIIE plus the agreed spread. The agreement typically specifies fallback provisions if TIIE is not published on a given day—usually the last published rate applies.

A promissory note is a "título ejecutivo" under Mexican civil procedure codes, meaning the holder can file directly for attachment of assets (through a vía ejecutiva proceeding) without first winning a full trial on the underlying debt. The court reviews that the instrument is valid on its face and orders precautionary attachment of debtor assets. This is substantially faster than suing on a contract, which requires a full ordinary proceeding before attachment.

A fixed-asset loan gives the lender an automatic security interest in the acquired machinery by operation of law—the LGTOC provides this attachment without needing a separate pledge agreement, though RPP registration still strengthens the position. A term loan for the same purpose is unsecured by default unless a separate pledge or guarantee is executed. Banks strongly prefer to document machinery loans as fixed-asset loans for this reason.