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Suppose I live in Canada. If I want to borrow money from the banks here and use that money in another country to carry out construction projects and hence make profit. Is it possible to create a legal entity here, borrow money, lend it to the offshore corporation for a greater percentage to make profit and have the banks approve these loans? Any ideas?

  • Yes it is possible. It would depend on Banks policies whether they would lend. Quite a few large corporations borrow money in one country for business needs in other country – Dheer Oct 15 '15 at 4:59
  • There is one keyword in @Dheer 's response that is critical here: "large corporations". This works for them because the foreign investments are just a part of their total business (which as a whole stands as collateral). "Setting up a new legal entity in order to get a loan" is a very different case. – vic Oct 16 '15 at 14:37
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Most likely, this will not work they way you think.

First things first, to get a loan, the bank needs to accept your collateral. Note that this is not directly related to the question what you plan to do with the loan.

Example: you have a portfolio of stocks and bonds worth USD 2 million. The bank decides to give you a loan of USD 1 million against that collateral. The bank doesn't care if you will use the loan to invest in foreign RE or use it up in a casino, it has your collateral as safety.

So, from the way you describe it, I take it you don't have the necessary local collateral but you wish to use your foreign investments as such. In this case it really doesn't matter where you live or where you incorporate a company, the bank will only give you the loan if it accepts the foreign collateral.

From professional experience with this exact question I can tell you, there are very few banks that will lend against foreign property. And there are even less banks, if any, that will lend against foreign projects.

To sum it up: Just forget banks. You might find a private lender to help you out but it will cost you dearly. The best option you have is to find a strategic partner who can cough up the money you need but since he is taking the bigger risk, he will also take the bigger profit share.

  • Thanks for the reply, let me clarify my hypothetical situation and I would love to hear your opinion on it. Assuming I start a business that has had a steady net income after expenses of $300,000 for the past year and continues to generate with growth assuming upward of net $30,000 / month. Will having this company create a separate daughter legal entity OR borrowing money on its own from the banks to use it for investment offshore into companies. So if I dont have assets worth 1 million but I generate around $300,000 net income/year, will they then allow say a $500,000 loan What do you think? – Danny Watts Oct 16 '15 at 23:06
  • You need to convince them that these numbers are entirely reliable and that the business is worth at least $500,00 ... and the banks aren't going to take your word for it; they will want to see evidence that it's already a successful and stable business. As Vic said, what you're proposing would be more a venture capital arrangement than a normal loan, and it will be very expensive because it is a high risk. – keshlam Oct 16 '15 at 23:16
  • 12 months is not much of a track record. Even if your business plan kicks ass, the collateral is still abroad with all the inherent risks. Don't count on money from banks. – vic Oct 17 '15 at 0:46
  • Thanks guys for heads up. Will be seeking another way :) – Danny Watts Oct 17 '15 at 23:24
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    I have heard about banks lending against foreign property, but that's EU internal (Eurozone even), and then just across a single border. But that's really just a bank testing the waters before formally expanding. Using the Canadian example from the question, probably the only foreign country considered from there would be the USA. – MSalters Oct 18 '15 at 21:14
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Yes it is possible. It would depend on Banks policies whether they would lend. Quite a few large corporations borrow money in one country for business needs in other country

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    Of course, it's up to you to convince the bank that you're a trustworthy borrower, and that you have the collateral to guarantee that loan with. Possible does not mean easy. – keshlam Oct 16 '15 at 11:54

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