How to Get a Business Loan as a Foreigner in the UK

Can Foreigners Get a Business Loan in the UK?

Yes, business loans may be available to foreigners in the UK, but there are normally strict criteria that must be met (see below for more details). There is no blanket rule that states that a foreign national cannot secure a business loan in the UK. Whether a business loan is granted to a person from another country will ultimately depend on criteria such as the purpose of the loan, the credit history of the applicant, and whether the holder has the necessary immigration clearance (i.e. visa).

Types of Business Loans Available in the UK

The UK has a robust commercial finance sector, and several types of business loans are available, including:

• Start-up Loans
• Government Grants
• Bank Loans

UK Start-up funding options are available from a range of providers, including the British Business Bank, backed by the British Government. Such loans are available to support the initial stage of business establishment and are available to businesses that are within their initial 36 months of trading. The funds cannot be used for debt repayment, qualifications, or education. Typically, as long as your company is incorporated within 36 months of the date of application, it will be eligible for a start-up loan (assuming all of the other criteria are met).

Government grants are different to business loans in that they do not have to be repaid. The UK government has a directory of government grants, including where they are available, relevant sectors, purposes, and amounts. They are normally used to support specific projects or initiatives. For example, ‘green grants’ are used for sustainability projects, and direct grants provide a direct cash sum for a particular purpose or project. The range of government grants available to you will depend on the size of your business, your location, your industry sector, and the intended purpose of the funds.

Business loans for foreigners in the UK may be available from private banks and specialist loan providers. Strict lending criteria apply, including the following:

• Viability of the business
• Past, current, and future business financials
• Credit history
• Availability of security and collateral
• Trading history
• The purpose of the loan
• The ability of the business to repay the loan, and
• The current market conditions.

Start-up Loan Eligibility Criteria for Foreign Entrepreneurs

To get a start-up business loan, applicants must typically:

• Be present in the UK when they apply
• Live in the UK
• Be aged 18 or over
• Have or plan to start a UK-based business that’s been fully trading for less than 36 months
• Have a visa that meets their minimum loan term criteria and enables them to be self-employed in the UK

Start-up loan applicants will also be assessed based on other criteria, such as their credit history, business plan and whether the funds will be used to fund the initial cost of starting and developing a business.

Documents Required for Business Loan Applications

To apply for a business loan in the UK as a foreign national, you will be asked to provide a number of documents to support your application. The exact documents you need to provide will depend on the lender you select, but they may include some or all of the following:

• Passport
• Visa confirming you have the right to run a business in the UK
• Proof of your personal address in the UK
• Proof that your business is established in the UK (e.g. Incorporation certificate and business licence)
• Details of existing business assets
• Business plan
• Confirmation that your business idea has been endorsed by an approved endorsing body
• Bank statements
• Personal tax returns
• Financial accounts/balance sheet / financial forecasts, and
• Overseas credit history

How to Improve Your Chances of Loan Approval

Ultimately, the eligibility criteria that must be met to get a business loan in the UK as a foreigner will depend on the individual lender. We recommend speaking to the lender before you apply to better understand their lending criteria or an independent business lending broker who has visibility of a wide portfolio of different business loans in the UK. They can recommend which loans are most suitable for your needs based on the eligibility criteria and your background and circumstances.

Best UK Banks for Business Loans

When it comes to the best banks for business loans in the UK, some of the most popular and well-established institutions include the following:

• Barclays
• HSBC
• Lloyds, and
• NatWest

To better understand the range of business bank loans available in the UK, consider using a comparison website such as Money Supermarket. Based on factors such as the amount you need to borrow, how soon you need the funds, and the purpose of the loan, they will recommend the best bank loans for your requirements (see the start-up business loan requirements in the UK below).

Alternative Funding Options

Banks are not the only source of business loans in the UK; a wide range of alternative funding options are now available, including:

• Angel Investors – Whereby wealthy individuals with readily available capital will invest in businesses that align with their values or personal mission. You will most likely need to pitch your ideas directly to them to get their financial ‘buy-in’. If you are interested in this route, consider using the Angel Investment Network to find suitable angel investors.
• Crowdfunding – Fundraisers collect money from a large number of people via online platforms such as crowdfunder.co.uk
• Venture capital – Investment provided by a private equity firm to fund start-ups, early-stage businesses, and emerging companies, with high growth potential
• Grants – UK government grants for entrepreneurs may be available to fund specific projects or initiatives
• Regional and community funding – funding provided by local organisations and regional authorities
• Invoice factoring – whereby businesses sell their unpaid invoices in exchange for cash

Government Schemes Supporting Foreign Entrepreneurs

The main government scheme that supports foreign entrepreneurs is the Global Entrepreneur Programme (GEP). This scheme enables “ambitious, internationally mobile entrepreneurs and their innovation-rich businesses” to come to the UK to establish a UK global headquarters. Once set up in the UK, the business receives dedicated support from the ‘GEP Alumni Academy’. This scheme is suitable for science and technology companies considering the Innovator Founder visa. Applicants must:

• Be beyond the proof-of-concept stage.
• Not have a presence in the UK
• Be generating or on the cusp of generating revenues, ideally with strong intellectual property (IP).
• Have a strong willingness to relocate your global headquarters to the UK with at least one co-founder based here, and
• Have detailed plans for building the company in the UK, including fast growth and creating high skilled jobs here.

Loan Repayment Terms & Interest Rates to Consider

It is important to understand the terms and UK business loan interest rates of the products you are considering. Again, a business loan broker can explain these to you and help you secure the most favourable terms for your loan agreement. Bank loan interest rates for businesses typically range from 6% to 20%. Secured loans tend to have a lower interest rate, while unsecured loans often have a higher rate of interest due to the risk incurred by the lender.

Common Reasons Business Loans Get Rejected & How to Fix Them

Business loans can be rejected for a wide range of reasons, including: