Tuesday, August 16, 2022

Three Low-Risk Ideas for Investment Immigration to Canada

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By Feruza Djamalova, co-founder and senior corporate immigration attorney of Law firm Sobirovs.

Investment immigration to Canada is a hot topic these days. Many investors and entrepreneurs worldwide are increasingly opting for Canada as their destination to do business and grow their investment portfolio. Perhaps one of the most frequently asked questions is, “What is the safest way to invest in a company in Canada?”

In this article, I want to share some ideas on how foreign entrepreneurs and investors can reduce risk when investing in a company in Canada. My suggestions are based on my observations of our clients’ investment immigration journey and should not be construed as legal advice.

Corporate Investment Strategies for Immigration and Profit

Below are my top three investment strategies for foreign entrepreneurs looking to invest in Canada.

1. Look beyond a company’s books and standard due diligence.

Invest in a company that is already profitable and has been profitable for several years. Usually, everyone does due diligence, examines a company’s books and liabilities, etc., and calculates the return on investment (ROI). They also ask the owner to provide some training after the purchase. However, you need to go beyond finance and understand what makes this particular business successful.

Understand what characteristics of the company make it successful. What is his business model? What is its market positioning? Pricing strategy? Marketing strategy? Who are the main customers and why do they buy from that company specifically? What are the most common customer complaints or positive feedback? What is the most popular product or service? Where does the company get its products from? Who’s on the team? Do they stay? What training is needed to maintain success? Observe employee engagement. Ask difficult questions. So dig deeper – look beyond finance and due diligence; research the business model and understand the systems behind it and the key success factors.

2. Find a strong local partner with relevant experience and invest with it.

You may have restricted a particular industry in which you want to invest, but you may not know the operational characteristics of the company in that industry. You don’t need to know everything about a company, but you may need an experienced partner. A partner can be an individual or company that needs capital to expand or complete a project. This piggyback allows you to take advantage of the expertise of an already established company/individual in Canada and provides a solid market entry strategy.

For example, a real estate development company needs further capital injections to complete specific construction projects they currently have. Co-investing in the same project with an established and successful company can help foreign investors gain expertise and make a profit. You ultimately invest in your industry of interest and get help in the business from an experienced partner.

3. Invest in a company that has enough assets to offset potential losses.

Investing in a company with good assets can be beneficial for several reasons. If the company has valuable assets, these assets can be used to help the company in times of financial distress. The resilience of your investment should be at the top of your list when assessing potential businesses. On the other hand, these assets can be used to demonstrate the financial stability of the company when seeking loans and an inflow of investment capital.

When looking at assets, you should focus on real estate, equipment and other tangible or intangible assets. Does the company own the commercial building in which it is located? Does it own any part of it? Does the company own the equipment it uses to operate? For example, a garage that owns the building, heavy hoists, and all equipment is much more valuable than a garage with no assets. You can even look beyond the intellectual property the company may own. Some companies have well-developed trademarks that can secure certain market areas for several years in the future.

Low Risk Business Ideas

Since you now know the benefits of investing in an existing business, let me share with you some interesting investment immigration business ideas.

1. Medical Clinics

Healthcare is one of the most important sectors in Canada. Numerous successful medical clinics across the country are poised for expansion. For some reason, they may not have the cash to fund a new location or purchase new medical equipment. This is where you, a foreign investor, step in. You can fund their expansion ideas for co-ownership of the new or existing clinic location.

Healthcare is one of the few examples where revenues don’t seem to slow in tough economic times. By investing in a very stable industry, you are practically securing your investment for decades. This is especially important when your financial investment in a Canadian company directly affects the outcome of your immigration application.

2. Real Estate Bakeries

Many successful bakeries have solid contracts to supply supermarkets with pastries. They are ready for more contracts, but may be struggling to hire new staff, need more space, or have other production constraints. Your investment will solve their problems and they will be able to increase their revenue by winning more contracts.

The best thing about bakeries, or other brick-and-mortar businesses, is that some of them own the commercial space from which they operate. Investing in a real estate backed company will make your investment safer and can bring more financial benefits to you in the future.

3. Haunted Kitchens

Ghost kitchens are industrial-sized kitchens that can be rented by anyone for a short period of time. In Ontario, these cuisines are usually: booked for several months ahead. As with any business, some of these haunted kitchens struggle to expand, which can help your investment. You can help the companies open more locations or invest in new equipment to attract more customers.

These haunted kitchens fall into a much sought after and highly efficient business category. People always want to use their services for their culinary production needs. These companies are also masters of increasing efficiency in the use of space, as some are open around the clock, seven days a week!

The information provided here is not legal advice and is not intended to be a substitute for counsel on any particular matter. For legal advice, you should consult a lawyer related to your specific situation.

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