Lending service access for a buyer who is not a citizen of Canada
July 10, 2024
by a searcher from University of Teesside in Toronto, ON, Canada
Does anyone has any idea if there are any restrictions in accessing lending services from Canadian Banks and other financial institutions when the buyer is not a Canadian citizen.
from University of Toronto in Toronto, ON, Canada
Short Answer: 1) get a business with a lot of hard assets 2) depending on the amount there might be a path to a personal guarantee 3) get a Canadian partner
The way I think of the issue of financing in deals as you know and some might agree, the bank will pay less for the business you’re buying than what you have offered because they’re naturally looking to ensure not only is their interest paid but that it will never stop being paid so it stuff a lot of safety margin.
I think it’s that safety margin that you’re really financing either by convincing the bank to reduce it with asset collateral security or by betting you personally with your own assets. Citizen or not, I think that formula applies in the Canada or the US with varying safety margin as a CAD bank is usually more conservative so higher safety margin but may therefore also charge a lower interest rate.
from University of Toronto in Toronto, ON, Canada
The personal guarantee is relevant to the risk in the business and to the cash-flows. If you buy an ongoing concern that’s been profitable and significantly so the business can hold up the debt but with buying franchises or startup service business (to your point) the lack of assets makes it harder for the bank to use the business as only collateral. Speaking to my experience in private and pubco ownership of a tech company but others might have had a different experience than mine.
I find the above is magnified when you are buying a business with a weak corporate credit score and your personal credit score is from outside the country either (like me) a Canadian looking for US financing or a non-Canadian looking for Canadian financing.
Maybe someone can describe their experience in similar contexts?