Photo: RNZ
Baby boomers struggling to sell up their small businesses have got a surprise boost after the government announced a new visa for migrants who might want to buy them out.
International investors could be given residence after as little as 12 months if they buy an existing firm and employ at least one more person.
The new business investor visa announced on Wednesday will replace the entrepreneur visa, and has been welcomed by immigration industry members.
Investors would get a 12-month fast-track to residence pathway through a $2 million investment, while those with less to spend – but a minimum of $1m – would wait three years for residence.
Any business they were buying would need to have existed for more than five years, meet financial criteria and have been employing at least five full-time staff.
“The changes appear to be a sensible decision to address the number of businesses in New Zealand that are mature and are looking for succession plans as the baby boom generation retires,” said immigation adviser Tobias Tohill.
“There’s quite a few businesses in New Zealand that have been running for a number of years and are good businesses with good profits. And the owners are getting on in years or they’ve had a bit of a hard time over Covid, and they’re ready to to pull back or to move on.
“There isn’t the capital in New Zealand, or the people willing to come into those often quite specialised businesses. Succession planning has been huge work for a lot of firms out there in the last few years, but the capital hasn’t been available, particularly with the recession we’ve been through. And so opening up those businesses for investment in a way that’s certain and clear to investors from overseas is a sensible change from the existing entrepreneur visa, which didn’t readily allow for that kind of investment in established businesses.”
He’s seen examples in rural areas such as medical and dental practices for sale, farmers looking for a buyer and an industrial company trying to find a buyer with specialist knowledge to take it over.
“The owner might have started it 30, 40 years ago and still be in the business, but he’s getting on in years. He might be in his 60s or 70s now, ready to step back or step out, but doesn’t want to see the business fold. It’s more than a small amount of capital required for stock and for the wage bill.
“It’s a reliable business, but because you have to have someone who’s willing to get deeply into the business – it’s not big enough that you can just buy it and be a passive investor, you’ve got to be active in it – it can be hard to find someone who wants to work in that specialist area.”
The new visa is in addition to the Active Investor Plus visa, launched earlier this year, which requires between $5m and $10m in capital.
Immigration Minister Erica Stanford
Photo: RNZ / REECE BAKER
Clearer rules
Immigration Minister Erica Stanford said the new business investor visa would have clearer settings than the entrepreneur visa it is replacing, which had low application volumes and high visa decline rates.
Migrant investors would need to meet English language requirements, and have business experience.
“This new visa will bring overseas investment to maintain and create jobs, grow incomes, and breathe new life into existing businesses across the country,” she said. “We are introducing a more targeted pathway for experienced businesspeople with capital to invest and the hands-on experience and skills needed to run a successful business.”
Critics said the now-finished entrepreneur visa had vague criteria which deterred investors worried about the potential for losing their money as well as their chances at getting residence.
Association for Migration and Investment chairperson Simon Laurent said demand for investors wanting to buy and run their own company was high, and was matched by willing sellers.
“For the last 10 years or so, there’s been quite a lot of conversation in the industry about all the baby boomers retiring and the concern that all those businesses are just going to fold. So yes, I think there’s a demand. I don’t know how big it is, but I’m sure it’s there and it’s been around for quite some time.”
As to whether there would be concerns that the minimum investment levels could be set too high or low, he said it looked to be about right.
“I don’t think it’s intended to be just a method of buying residence. The intention is clearly that a person first of all puts their money in and then works in the business. So for instance, if you’re investing a million dollars you need to run that business and run it successfully, maintain the staffing levels – that’s a challenge in itself. So I think this is probably not a bad setting.”
The predecessor to the entrepreneur category had a $100,000 minimum investment. “That was too low,” he said. “We ended up with a whole lot of $2 shops and bottle shops and basically junk businesses taking over that policy space before the policy was then reset to make it almost impossible for anyone to qualify.
“So I think this is a sort of a loosening of the criteria, but at the same time putting down the challenge to people to stump up with a reasonable sum of money in order to actually contribute to the New Zealand economy in some way.”
Stanford said work was also underway on a visa pathway for startup entrepreneurs with scalable, innovative business ideas.
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