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Financing a business as a foreigner in Costa Rica

Financing a business as a foreigner in Costa RicaIt’s amazing how many emails we receive from future expats who ask about financing a business purchase or a startup. Lots of people who would love to move to Costa Rica but don’t have enough money to start or buy a business to make a living.

A great option for those who don’t have enough cash would be to buy an existing business and get owner financing.  But is financing a business as a non-resident a possibility?

A typical request that we receive looks like this:

My question is related to purchasing an existing business in Costa Rica. I am currently located in the U.S. and have begun researching purchasing property in Costa Rica. I am wondering, from a financing standpoint (someone from the U.S.) are there good sources that you might recommend for my research (lenders or institutions). Where would be a good place to start. Thank you.

Financing a business as a foreigner in Costa Rica

Credit score

It looks pretty simple, doesn’t it? BUT, there’s a big BUT. Lenders in Costa Rica don’t know you because you are a complete stranger to the authorities, the system, and the business world.  Oh, you might have great credit back home and it would be easy for a local lender to have a look at your credit score.

Unfortunately, that credit score only shows how good your credit is “back home”. They could easily give you a loan because you have great credit in this other place. But then when business goes bad for you, you’ll just shut it all down and get on the first flight out of Costa Rica. And the lender will get stuck with the mess. Does that make sense to you?

In the U.S.

Most lenders in the U.S. require a 2/2/2 rule for financing a business. This rule means:

  • Credit history of 2 years
  • 2 years of US employment,
  • 2 years of tax filing in the US.

If you meet these requirements, you can get a mortgage on the exact same terms as a permanent resident or a US citizen.

Financing a business as a foreigner in Costa Rica

A Mexican

I’ve given this example before in a few other blogs. This Mexican couple, Juan and Juanita, they want to move to Houston, Texas. Juan and Juanita have this great opportunity to purchase a Mexican style restaurant in Montrose, but they need financing to purchase the business.

All lenders ask them if they are residents of the United States if they have a green card. Unfortunately, their answer is no.  As a non-resident, just like Juan and Juanita, you will have very few options for financing a business in Costa Rica.

Options for financing a business

As you can see, it is not as easy as you thought. All those dreams of buying a business in Costa Rica and live the Pura Vida just shattered. But, there might be a few options that you should look into:

1. Ask for a loan from family and friends

The easiest way is to ask a friend of a family member for a loan. If your credit is so great and you’re a trustworthy business person, they will give you a business loan without batting an eye. Won’t they? And probably at a much better interest rate than Costa Rican lenders would charge.

2. Equity loan

Keep your property in your hometown and get an equity loan from a lender. Please DO ask if they will allow you to use that money for financing a business in another country.

3. Use your retirement funds

If you have retirement funds, this is a fantastic option for financing a business in Costa Rica. The advantage is that it would be seen as an equity investment rather than a loan. Find out more in this article in NerdWallet.

Financing a business as a foreigner in Costa Rica

4. Credit card

If you have such great credit, you might be able to use your credit card to finance a business. There is, of course, a risk to using your credit card, but so is buying or starting a business in Costa Rica.

5. Save first

If all the above options are no good, save first, then make the big step of moving to Costa Rica.

Looking to purchase an existing business in Costa Rica? Do your homework and play by the rules, then you will do well. For your Costa Rica real estate purchases, contact us.

Finally, feel free to leave your comments on this blog. If you like this article, please also feel free to share it on your social media.

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While we’re at it, I DO want to remind you that we appreciate any referrals you can send us. Finally, please remember the American-European real estate Group’s agents when you refer a real estate agent. Because we DO appreciate your business. Therefore, we are very good at what we do.

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Ivo Henfling

Ivo Henfling started the American European Real Estate Network Costa Rica in 1996 and has grown it into the largest Costa Rica MLS with thousands of up to date property listings for sale and for rent. Ivo has written hundreds of articles about real estate and living in Costa Rica for The Tico Times and other online informational sites.

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