Navigating complex credit challenges with the help of private banking
Your finances may be complex, but there are ways to leverage your funds to achieve your business and personal goals.
YOUR BUSINESS
BY DON SUTTON
October 2024
Rhodina is building her way to success. She's a small developer, but by constructing her first condominium plaza (complete with space for retail), she hopes to grow into a big one. She just needs the additional funds to do it.
Time sensitive opportunity
IMAGE: INNA GERTSBERG
A business owner with 15+ holding companies, but little cash on hand, wanted to ensure she could procure funds immediately if she found an enticing business opportunity. While she figured she could ultimately get a loan if she went the traditional route, she knew there would be delays and was concerned this path would not provide sufficient funds to meet her needs.
The information contained herein has been provided by TD Wealth and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual's objectives and risk tolerance. TD Wealth represents the products and services offered by TD Waterhouse Canada Inc., TD Waterhouse Private Investment Counsel Inc., TD Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company). TD Wealth Private Wealth Management represents the products and services available through TD Wealth Private Investment Advice (a division of TD Waterhouse Canada Inc.), TD Wealth Private Investment Counsel (offered by TD Waterhouse Private Investment Counsel Inc.), TD Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company). ®The TD logo and other TD trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.
Here's the problem: Rhodina's business holdings are complicated. Her investments are in the name of a holding company, her operating company generates income and the new project will be under yet another holding company. Because the new building itself can't be used as collateral, procuring a loan could prove difficult. Moreover, Rhodina knows that selling her investments to raise money would incur capital gains tax.
Rhodina's a composite of many business owners facing the same challenge. While they may have unique circumstances, the financing obstacles they encounter are often very similar: Their true income, wealth and credit worthiness is obscured by the many assets they hold under various legal entities.
Ultimately, however, when a business opportunity arises, procuring funds quickly can mean the difference between success and failure.
Belinda Princi, a Senior Private Banker with TD Wealth, says that helping her clients take advantage of these types of business opportunities is part of her job. While a private banker may be many things — from a financial concierge to a project manager — Princi says, “our best attribute is the ability to protect and leverage wealth effectively so that our clients can create more of it.”
“Business owners don't fit into conventional silos. They could be on their first venture or they may have grown to the point where they have their own advisory team of accountants and lawyers,” she adds. “Whatever the situation is, we want to ensure the deal gets done efficiently and is structured properly for tax purposes to avoid future issues or hassles.”
Princi, who works exlusively with business owners in Ottawa, attributes a private banker's ability to address the challenges of complex financing to their deep knowledge of business, banking and financial objective setting. She says many individuals' personal and business dealings involve conflicting tax, litigation and cross-border currency issues. The fact is off-the-shelf options sometimes fail to take these complexities into account. Private bankers, on the other hand, “know how to facilitate different types of financing or come up with creative credit solutions.”
Disclaimer
A business owner, whose wealth is tied up in his business, had an opportunity to buy out his partner who is on the verge of retiring. He worried his life's work could be in jeopardy if there was a new ownership partner. A private banker helped structure a fair offer so the retiring partner wouldn't look elsewhere.
Buying out the partner
A family owned a principal residence, a winter cottage and a summer cottage in different locations. Each home was mortgaged and listed under a different name. When the family discovered a unique opportunity to buy a prestigious home in Vancouver, British Columbia at a very reasonable price, they were keen to pursue it. However, the timeline was tight and if they waited for regular mortgage financing on each of their existing homes, the opportunity would have been lost.
Acquiring the dream home
In many cases, a line of credit is the preferred solution to these challenges. When a business owner has numerous assets spread out among various companies under different legal names, it's possible for a private banker to recognize that these assets are part of an individual's larger business entity and use their total value for a line of credit.
“Saving tax is paramount in situations like this. If people were to cash out their investments to fund their next project, they may have a large capital gains bill to pay. With this arrangement, taxes are mitigated because we're going to keep the assets in kind and use them as security,” says Princi. “Sometimes a client has an idea of what success looks like, but isn't sure which options will get them there. We can help them make the best decision.”
We have more information about the ways private banking can help you here.
The complex credit solution
What's more, if you're a business owner, your time is valuable and explaining your situation to someone unfamiliar with your affairs means some of that precious time is lost.
Private bankers have experience working with a whole variety of clients, including small business owners and medical professionals. When your circumstances require finesse, having a banker a call or email message away can pay dividends.
Not just figuratively either. A private banker can streamline day-to-day administration like distributing your company's dividends, facilitating the transfer of funds and even setting up an automated monthly payment schedule for your credit card bill — leaving you more time to concentrate on your business.
A private banker has access to a team of personal finance specialists who can help you with anything from tax planning and business succession to investment strategy. And then there's the occasional unusual request that needs accommodating as well. Princi tells of a client who needed financing to purchase a new yacht, or a large amount wired to pay for a Turkish rug bought on vacation.
Clients have a variety of financial goals, both professional and personal, and it's a private banker's job to help build a way forward. Princi shared with us a few examples of complex credit situations she has encountered where a private banker was able to assist.
Senior Private Banker, TD Wealth
Belinda princi
Business owners don't fit into conventional silos.
Here's the problem: Rhodina's business holdings are complicated. Her investments are in the name of a holding company, her operating company generates income and the new project will be under yet another holding company. Because the new building itself can't be used as collateral, procuring a loan could prove difficult. Moreover, Rhodina knows that selling her investments to raise money would incur capital gains tax.
Rhodina's a composite of many business owners facing the same challenge. While they may have unique circumstances, the financing obstacles they encounter are often very similar: Their true income, wealth and credit worthiness is obscured by the many assets they hold under various legal entities.
Ultimately, however, when a business opportunity arises, procuring funds quickly can mean the difference between success and failure.
Belinda Princi, a Senior Private Banker with TD Wealth, says that helping her clients take advantage of these types of business opportunities is part of her job. While a private banker may be many things — from a financial concierge to a project manager — Princi says, “our best attribute is the ability to protect and leverage wealth effectively so that our clients can create more of it.”
“Business owners don't fit into conventional silos. They could be on their first venture or they may have grown to the point where they have their own advisory team of accountants and lawyers,” she adds. “Whatever the situation is, we want to ensure the deal gets done efficiently and is structured properly for tax purposes to avoid future issues or hassles.”
Princi, who works exlusively with business owners in Ottawa, attributes a private banker's ability to address the challenges of complex financing to their deep knowledge of business, banking and financial objective setting. She says many individuals' personal and business dealings involve conflicting tax, litigation and cross-border currency issues. The fact is off-the-shelf options sometimes fail to take these complexities into account. Private bankers, on the other hand, “know how to facilitate different types of financing or come up with creative credit solutions.”
The information contained herein has been provided by TD Wealth and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual's objectives and risk tolerance.
TD Wealth represents the products and services offered by TD Waterhouse Canada Inc., TD Waterhouse Private Investment Counsel Inc., TD Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company).
TD Wealth Private Wealth Management represents the products and services available through TD Wealth Private Investment Advice (a division of TD Waterhouse Canada Inc.), TD Wealth Private Investment Counsel (offered by TD Waterhouse Private Investment Counsel Inc.), TD Wealth Private Banking (offered by The Toronto-Dominion Bank) and TD Wealth Private Trust (offered by The Canada Trust Company).
®The TD logo and other TD trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.