Jason Arbuck’s article “Canadian/U.S. Cross-Border Lending: Issues to Consider to Avoid Potential Costs & Delays” has been published on mbfinancial.com. The article was co-written with Dan Flaro, Senior Vice President & Country Executive at MB Business Capital Canada. Write the authors:
The management of mid-market companies domiciled in Canada (or the U.S.) who consider embarking on business expansions south (or north) of the border often assume their incumbent lender will be readily able to finance such an expansion with reasonable notice. Their incumbent lender has operations in both countries, knows the company’s business well and is best positioned, in theory, to react to such a request. Often, the company expects that its line of credit can be extended cross-border, enabling it to direct borrowings to either entity, to finance the working capital needs in each country as required. However, there are several material legal, tax and practical banking issues that could come into play and should be considered by both the borrower and the lender(s), respectively.
The article goes on to look at specific examples, including:
- Lending to foreign jurisdictions
- Enforceability of cross-border guarantees
- Tax implications