Japan Business Manager Visa: The Trap of Borrowed Capital and Legal Approaches to Avoid the “Show Money” Designation

This article is written by a Japanese local.

To prepare the capital of 30 million JPY or more required to obtain a Business Manager Visa, many foreign entrepreneurs consider schemes where they borrow funds from another company they manage, a friend’s company, or relatives, and use that money as capital investment.

However, during the Immigration Services Agency’s screening, this method is highly susceptible to being suspected as “show money (funds temporarily prepared merely to pass the screening),” and poorly planned fund transfers lead directly to visa denial. This article explains the legal “traps” when utilizing borrowed funds and the objective proof procedures required to overcome them.

1. Why Are “Borrowed Funds” Strictly Scrutinized by Immigration?

[Summary] Immigration strictly examines not only the “amount” but also whether the funds are “stable self-owned capital” permanently bound to the business.

What Immigration is most wary of in capital screenings is the “show money” tactic, where funds are withdrawn immediately after visa approval and returned to the original lender.

In the case of capital formed through borrowed funds, the examiner harbors a strong suspicion: “Was this borrowed temporarily just for visa acquisition, lacking actual investment into the business?” The moment funds carrying a repayment obligation are used as capital investment, they are judged to lack the stability of “own funds,” posing a risk that the continuity of the business will be fundamentally denied.

2. The “3 Fatal Pitfalls” That Invite Denial

[Summary] The lender’s lack of financial capacity, unnatural repayment conditions, and the confusion between debt and equity under the Companies Act are the main causes for denial.

When utilizing borrowed funds, Immigration examiners focus particularly on the following three points as “grounds for denial.” Please check if your situation falls under any of these.

① Lack of “Proof of Source” from the Lender

Simply submitting a contract stating “I borrowed it from another company or an acquaintance” is insufficient. You must prove, using financial statements or bankbook histories, whether the lending corporation or individual “truly had the legal financial capacity (retained earnings or savings) to lend out a massive sum of 30 million JPY.” If the lender’s fund formation process is opaque, it will be suspected as money laundering or fictitious fund movement.

② The Boundary Between Repayment Obligations and “Show Money”

“Unnatural borrowing conditions in business,” such as extremely short repayment periods of less than a year, or moving tens of millions of yen with no interest and no collateral, serve as strong evidence that it is fictitious “show money.” If it is to be structured strictly as a loan, a monetary loan agreement with a rational interest rate setting and a realistic repayment plan are mandatory.

③ Confusing “Liabilities” and “Equity” Under the Companies Act

The requirement for a Business Manager Visa is a “capital amount or total contribution of 30 million JPY or more.” If you borrow funds personally and “invest (subscribe for shares)” them into the company, it becomes capital. However, if the newly established company borrows funds directly from a financial institution or another company, it is a “liability (debt)” and is not counted toward the 30 million JPY capital requirement at all. Misunderstanding this basic rule of law and accounting results in immediate denial for failing to meet the requirements.

3. The Logic to Have Borrowed Funds Recognized as Legitimate Capital

[Summary] You must prove the rationality of the borrowing and that it can be reasonably repaid from business profits using objective data.

If you unavoidably must use borrowed funds as the source of capital investment, you must construct the following logic rather than merely filling out paperwork.

• Explanation of the Necessity and Rationality of Borrowing: Clarify in a statement of reasons why you dared to take the form of borrowing to start a business in Japan instead of using only your own funds.
• Presentation of a Long-Term Repayment Plan: Explain, in perfect linkage with the business plan’s cash flow table, that installment repayments can be made reasonably from business revenues after deducting harsh consumption tax burdens and fixed costs from the first year.
• Consideration of Alternatives: Consider redesigning into a more stable capital structure without repayment obligations, such as allocating shares to the lender (making them a co-investor) instead of a simple loan.

4. Practical Q&A (Fundraising Troubles and Avoidance)

[Summary] Answers questions on Immigration’s handling of borrowing from relatives and bank loans.

Q. Can I use funds borrowed from relatives (like parents) for capital investment?

A. It is possible. However, even between parents and children, you must clarify in a contract whether it is a “gift” or a “loan.” A gift is easier to treat as your own funds because there is no repayment obligation, but you must submit proof tracing back to “the parent’s proof of assets” detailing how the parent earned those funds.

Q. If the company receives a 30 million JPY loan from a bank, does it satisfy the visa requirement?

A. It does not. A bank loan to the corporation is a “liability,” not “capital,” so it falls outside the business scale requirement (total contribution of 30 million JPY) set by the Immigration Act. To meet the requirement, you must prepare 30 million JPY strictly as “contribution (Capital or Capital Reserve)” accompanying the issuance of shares.

Conclusion: The “Quality” of Fundraising Determines Visa Success

Now that 30 million JPY is mandatory due to the legal revision, the screening for the Business Manager Visa has become extremely strict. Capital formation using borrowed funds is particularly susceptible to being “targeted” by Immigration. The deciding factor is not matching superficial numbers, but how logically and legally you can construct the objective facts and rationality behind the funds.