Page last updated at 20:29 GMT, Sunday, 26 February 2006

Borrowing money from abroad

Japanese financial data
Japan has had very low interest rates for a number of years
No-one likes paying the interest on their bank loans, but for savvy UK firms there is a way to reduce the amount they have to pay: borrow the money from abroad.

With Japanese interest rates at rock bottom, for example, a UK firm could save a fortune if they hooked up with a Tokyo-based lender.

As business banking expert Paul Lynam explains, securing such a deal may be difficult, but it is far from impossible.

QUESTION Daniel Brown, London, UK
I recently noticed that Japanese (and other countries) interest rates are almost zero.

Is it possible/legal to raise funds from a Japanese bank to take advantage of this?

I'm aware that currency fluctuations could wipe out any savings made. But given recent history, with fairly stable exchange rates, is this a risk considering?

ANSWER Paul Lynam, chief executive NatWest & RBS Business Banking
There is nothing to stop you applying for a loan in other countries to make use of the low interest rates, but there are a number of risks and difficulties you may have to face.

As you have mentioned, there is a risk relating to currency fluctuations.

There is also a potential difficulty with a bank based in another country being sufficiently comfortable with their knowledge of your local market and business in the UK, which could impact their ability to lend against your proposition.

The most prohibitive cost may come from the cost of taking supporting security, enough to cover the required borrowing.

For this reason, due to the high costs associated with taking security over - say - property in a foreign country, many banks choose not to lend for overseas businesses.

That said, there are still options available to you. There will undoubtedly be organisations in other countries that specialise in overseas lending, but you will need to shop around.


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