Opening The Wallet On Financing Acquisitions In Canada In The Sme Commercial MarketBusiness  Acquisition Financing In Canada

OVERVIEW – Information on business acquisition financing solutions in Canada

Business acquisition financing
in Canada, when successful, requires that the finance component of the transaction be not built on sand. Strength is needed in this area, so lets ‘ open the wallet ‘ on acquisitions acquired properly. Let’s dig in.

There are numerous methods of acquiring a business and raising the right amount of capital to finance the transaction – One of those that is less known to business folks is ‘ subordinated debt ‘ – in effect an unsecured cash flow loan.

While a cash flow loan is almost always more expensive than traditional bank term loans it is more flexible and can often carry a large part of the total financing needed to complete a deal. This loan ranks 2nd behind any secured debt, hence it’s ‘ subordinate’ to the secured finance part of the transaction.

If the loan is ‘ unsecured ‘ how then does the lender, i.e. a commercial finance company or a bank, view chances of repayment. Here it’s down to 2 words – ‘ CASH FLOW’. Business  Acquisition Financing In CanadaSo if you’re contemplating a cash flow loan as a part of your deal it’s safe to say you should spend some time on:

Past cash flow analysis

Present Cash Flow

Future projected cash flow (by the way – we’ never met a projection we didn’t like ‘ said one of our mentors)

Why would owners/financial managers consider a cash flow loan for business acquisition financing? Simply because 100% secured asset financing might not be possible, and the other alternative, ‘ owner equity’ is less desirable because it’s either unavailable from the owners, or more dilutive.

Many times in business owners/managers find a situation whereby they can acquire a competitor or a strategic partner. The valuation price on the deal might be more than the assets can support – especially if current owners do not wish to be a part of the financing via some sort of ‘vendor take back.’ In many cases a cash flow loan might not be a part of required debt and other ratio covenants.

Other sources of capital available for financing a purchase include:Business  Acquisition Financing In Canada
Government Guaranteed Business Loans

Asset Based term loans/lines of credit

Equipment Financing/Sale Leasebacks

Receivables/Inventory Finance

Whether it’s an opportunistic transaction you come by or a sale of a business as part of the ‘ graying effect ‘ of older business owners the financing of a transaction, done successfully, can make your firm more strategic and competitive in your industry.

So whether it’s about cash flow, assets, profits, or sales growth consider seeking out and speaking to a trusted , credible and experienced Canadian business financing advisor who can assist you with your acquisition finance needs.

Writer Stan Prokop 7 Park Avenue Financial :

Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :


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Business  Acquisition Financing In Canada

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