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The best time to consider your financial situation is when you are moving to a new country.
Can expat business owners get a loan? – that will be the topic of today’s article.
Banks give loans, and regardless of whether you are a foreigner or a citizen, they want you, as their client to buy these loans. Keep this in mind to understand that getting a loan as an expat is possible, and it is worth considering whether this will make your life as an emigrant easier. But where to start when applying for a loan in a country whose banking system is not too familiar to you?
A personal loan can be a liberating solution if you are looking to renovate your home, make a high-value purchase, or even pay off your debts. There are other types of loans such as business and student loans or mortgages, but in this article, we will discuss the business loans in different countries. So, if you are an expat who never thought it was possible to get a loan in the host country, then go on reading this article.
Whether you are an expat or a permanent resident, no bank will grant you a loan before asking about the purpose of the loan, the amount you want to borrow, and your monthly income and expenses. As an expat borrower, you should be aware that money you may have or receive from banks in your home country will most likely not be accounted for by the lending bank in your host country.
Generally speaking, personal loans do not require collateral (eg property, vehicle, other type of ownership) to act as a safety net in case you start missing loan payments. Personal loans, unlike mortgages, are usually unsecured. However, if you are late on your payments, there are still repercussions such as additional fees, litigation, and even loan default, which means your credit rating will be severely affected in the coming years.
You may be thinking this is not an interview and you are correct. But this is undoubtedly one of those life situations where you have to sell yourself convincingly in order to close the deal. The bank is interested in you being a responsible and reliable borrower.
When having an interview, make sure you are fully aware of the culture and business etiquette of the host country to avoid accidentally insulting your creditor or being judged as rude or arrogant. Plus, your clothes and body language can tell a lot about you, so keep it formal and confident.
It is a good and more convenient practice to apply for a loan from a bank where you have already worked and where you are welcomed as a reliable client. Once you have decided that you want to apply for a loan, do not come to the bank one day and ask for it. Instead, work for several months to establish good banking relationships and rapport with staff and managers. In the end, they are the ones who will decide on your loan.
To understand how this process is being done, let’s review a few examples of different countries and how they give loans to the expats.
Main business loan options for immigrants
Did you know that immigrants are much more likely to start their own businesses than native citizens? Anyways note that sometimes obtaining a working capital from a traditional lender (which is usually a bank) may be more difficult and may take more time for immigrant business owners.
Here are top financing options for expat business owners:
Small Business Administration (SBA) loans are some of the most affordable small business loan options you can find, but they have their drawbacks. In particular, in order to obtain SBA-sponsored business loan products for immigrants, you need to complete a large amount of paperwork.
Generally, if you have legal permanent resident status or hold a work visa, you are eligible for an SBA loan. However, you should take the time to familiarize yourself with the rules of participation in order to avoid delays in the application process.
If you are a refugee, you should consider these business grants. However, you do not need to be a refugee to get government approval for a grant. Non-refugees can find grants special websites, checking them regularly for grants that are appropriate to their needs. If you are applying for a grant, make sure you prepare your application carefully as competition for grants is very high.
In case none of the mentioned options work, it will be better to complete your own research on business grants for immigrants. Usually, the government or agencies you are working with may offer grants that are specifically for immigrants and don’t even work in your situation.
Friends and family
If you’re comfortable, ask your friends and family if they can help fund your business. Thanks to their financial support, you will be able to start your own business and hopefully it will become profitable in the shortest possible time.
Credit Cards for Business
Used wisely, business credit cards can help provide the short-term financing you need to start and grow your business. If you review your credit report before applying and have a good credit rating, you should have no problem getting approved.
It is important to use credit wisely and avoid accumulating debt, especially if the interest rate on the card is high. Consider finding a card that offers an interest-free introductory period so you have time to earn the funds you need to pay on time.
Successful crowdfunding campaigns can help you start your business successfully, sometimes on a larger scale than you might expect. For example, in any crowdfunding platform, you can raise money for your innovative ideas.
However, it can be a good funding option for immigrants who want to try a low-risk option and not lose a stake in their business.
Microloans or short-term business loans
Even if you have an excellent financial background, the immigrant’s lack of credit history can make it difficult to obtain traditional loans. However, short-term loans or microloans can be an ideal temporary measure. Since these loans are less risky for the lender, there are less stringent requirements for them.
The downside of a microloan is that the loan amount usually does not exceed $ 50,000. In addition, a short term loan will have relatively high payments as you will be repaying it over a shorter period, which can cause cash flow problems.
Getting a business loan in Singapore
In most countries, it is easy to get a loan if you are a resident. But what if you are a foreigner? This can be quite tricky. Do you need loans to achieve some goals, but you do not know how to do it? If you are a foreigner in Singapore, don’t panic. You can get the loan you want easily and securely. Foreigners from Singapore have access to personal loans usually obtained from licensed lenders. These loans are commonly used to pay rent, repairs, or cover emergency bills. What if you, as a foreigner, want to get a business loan? The following types of loans can be beneficial for your business;
Unsecured term business loans
You may need working capital for your business. This is the most common option. It is provided by banks approved by law and can be up to a maximum of $ 300,000 for any bank. These loans will be a good option to upgrade your business and cover the most part of expenses to successfully run it. You can obtain a loan by following the proper procedures required by banking laws and using legal documents. The advantage of this type of loan over a secured loan is that you do not need collateral. However, its interest rates are very high as it is more risky for the lender. Loan approval may also take longer or not go through. As for the foreigner, you may want to consider using this loan as you may not have an asset to use as collateral.
This is what drives trade around the world. It includes a guarantee of payment to the exporter from the importer. The importer can also be confident that the goods will be safely received upon payment of the money. Thus, it works well for both groups.
Suitable if you are dealing with the purchase of materials from suppliers. Even when dealing with overseas suppliers, you can send them letters of credit. It is also used in inventory financing. A letter of credit issued to an exporter is a trade finance instrument. It is used to confirm payment. It is used all over the world as a payment method and is accepted in world trade. You can purchase goods overseas using import financing. You can get this type of business loan from any of the local banks. Thus, if you are planning to pursue a construction, manufacturing or engineering business, trade finance will prove to be suitable for you in Singapore.
It is framed as a lease or an installment purchase. It is used to finance the purchase of fixed assets such as equipment and machinery. All businesses require the use of equipment, be it office or production equipment. Some even need a technique. Thus, banks in Singapore are a vital source of this type of financing. You can also consult with the suppliers of these products in installments. If you are not planning to stay in Singapore for long, you should rent them from a leasing company.
In 2016, the government developed a financing scheme to help local SMEs obtain financial support. Thus, these loans are funded by the government. They are also used as working capital. You can get up to $ 100,000. The Singapore government has set up nearly ten financial institutions to help people on this platform. Interest rates on these loans vary from one financier to another. To find out more about the rates and your eligibility to apply for a loan, please contact the participating banks.
Financing real estate
Your business will need to be set up indoors. Offices, manufacturing plants and even showrooms are some of the space needs. This will depend on the type and nature of your business. Mortgages provided by banks and other financiers can help finance real estate acquisitions. You can mortgage the real estate you already own to banks in order to receive financial assistance. In addition, you can get a loan to buy a new production or commercial space. This can be a problem for a foreigner, but the right guidance on how to get a loan can help.
Working capital loan
A working capital assistance scheme has been established for SMEs in Singapore. It has been improved so far and now offers funding of up to $ 600,000. This can help drive the growth of your business. Accordingly, you can access this loan from any of the 14 financial institutions available in Singapore. Their interest rates vary, so it is advised to ask them more if you need this loan. Again, as a foreigner, you may or may not be eligible for a loan; You should check with financial institutions.
As an exit in Singapore you have to know what qualifies you for getting a business loan there. Usually, lenders need to be confident and satisfied with your eligibility before granting you a business loan. Therefore, they will check your credit status to view your business credit history, the period you worked in the industry, and the business turnover. Your business should have generated some income in recent months, so reassure it that you can repay the loan.
You should also consider some important points before taking out a loan. These can include: how much the loan will cost, checking that the repayment terms match your needs, your eligibility criteria, and comparing fees and rates for different business loans.
Getting a business loan in the United States
When speaking about the United States everything seems very challenging and many people ask themselves – can they qualify for a business loan for their small business? Surprisingly, the answer is yes, but only in some cases. As a rule, Legal Permanent Residents (LPRs), who are green card holders, can easily qualify for a business loan. However, if the borrower is not a permanent resident from a legal point of view, things can get a little more complicated.
The business loan regulations state that the funding is available to “51% owned and controlled businesses that are not US citizens, as long as those individuals are legally based in the US.” However, the decision of an individual lender to grant a loan to non-citizens is at the discretion of each individual lender. If the lender really wants to proceed with the loan application process, he needs to obtain from the borrower a US Citizenship and Immigration Services (USCIS) Form I-551, also known as a green card.
If a potential business loan applicant does not have a green card, the lender have to fix the status of the borrower. According to experience, valid statuses can be:
- Asylum or temporary refugee with LPR states
- Registered foreigner admitted to the United States for a specific purpose and for a fixed period
- Alien subject to the Immigration Reform and Control Act (IRCA) 1986
However, in order to be eligible, a business must also meet other requirements, including:
- The current management must have been running the business for at least 12 months prior to the application date, otherwise they will have to personally guarantee the loan.
- The borrower must have sufficient US collateral to repay the loan in full at any time during the term.
In some cases, a business owned / operated by foreign nationals, foreign commercial organizations, or non-immigrant foreigners may also be eligible for business loan funding if it meets the conditions mentioned above.
Getting a business loan in Spain
Loans for non-residents are provided to foreigners who are not tax residents and want to run their business in the country. They should not be confused with loans for foreigners permanently residing in Spain – the conditions for issuance can be the same as for any citizen of the country.
Spanish financial institutions in recent years have been particularly cautious about lending to foreigners, even those who live in Spain and can provide collateral, such as real estate. Banks often require assurances that the business is operational and profitable, which is usually difficult to do when you first start out. According to the legal regulations of the European Union, both residents and non-residents of Spain should have the same eligibility for a loan, but in practice, you may encounter some obstacles.
If you need a bank loan, the first condition is a thorough and realistic business plan, which should include a description of how you plan to repay the loan. To draw up a business plan, it is best to contact specialists and international lawyers who will help you present it in a form acceptable to a Spanish credit institution. Many of these professionals are familiar with the nuances that you might overlook when preparing a business plan.
In each specific case, the conditions for obtaining a loan are determined by the bank itself. Credit institutions are trying in every possible way to protect themselves from non-payment, so the list of documents may vary, but an excellent business plan will be the key to a positive decision on granting you a loan.
Beginning non-resident entrepreneurs can count on a loan. To guarantee the loan repayment, you will need to invest at least an equal amount, and the repayment period is usually five to fifteen years. Interest rates vary considerably depending on the bank, the amount and the period of the loan, therefore it is recommended to contact several different institutions for advice.
Small and Medium Enterprises in Spain (PYME) are eligible for concessional loans offered by the Spanish State Credit Institute (Instituto de Crédito Oficial / ICO), which is part of the Ministry of Economy and Finance. It is possible to get a loan of up to 70% of the net investment and, if you do not have another loan or subsidy, you can apply for Micro-Credit, which provides up to 95% of the net investment (maximum 25,000 euros).
The ICO website is available in English and contains detailed information on this topic. In addition, there are so-called lines of credit (cuenta de crédito or póliza de crédito) in Spain. A line of credit at the stage of starting a business in Spain can be considered a loan in case of additional unforeseen expenses. You pay interest on the money you borrow when you need it, and a fee for being able to have a line of credit when you are not using it. Interest rates can be fixed or variable, and the term can be up to one year.
Business loan is an issue that is best dealt with with the help of qualified professionals and lawyers to avoid future complications or disappointments.
This principe is applied to almost all countries included in the EU and these rules and regulations are the same for every non-resident.
As you can see taking a business loan is pretty possible, but it’s either not that easy as you can imagine, you have to be prepared to go through a lot of documentation and it will require enough time. So be patient.