OVERVIEW – Information on business acquisition loan options in Canada. Buying an existing company requires specific knowledge around financing and value . Here’s what you need to know.
Buying an existing company is an attractive option for many business people/entrepreneurs. The right business acquisition loan and financing play a key role in the ultimate success when that decision is chosen. Let’s dig in.
The reasons to choose the ‘ buy a business’ strategy are obvious to most people: Circumstances around the purchase might make the purchase value of the business very attractive. Additionally most would agree it’s easier to grow a business than build a business from scratch, thereby eliminating a lot of risk.
The downside? Solid businesses that are growing and profitable are rarely ‘ cheap’, and also, if any business came with ‘no risk’ that would be a rare thing. We’ve met many clients who have inherited numerous supplier/financial/employee issues that were not discovered in any due diligence process.
The price of the business you are looking to purchase will almost always come back to the valuation and what type of financing can help complete the transaction successfully. Careful review of the financial statements around asset quality is absolutely key. One example might be the quality of the accounts receivable which can often unveil other issues related to sales/inventory/service etc.
Other issues to look for in the financials are profit margins, sales history, expenses, and owner takeout. Knowing these numbers gives you significant leverage in making a final offer you are comfortable with, and one that is ‘ financeable’.
Not always, but on occasion it’s an advantage to have the seller of the business participate in the financing. How? Via the ‘ vtb ‘ (vendor take back) option. This eliminates the need for some of the financing you require.
Although it’s technically possible to purchase a business without owner equity this generally is not how things work, and a commercial lender/bank will certainly prefer your financial participation in the deal. Many transactions completed also have the owner on occasion putting up some ‘ outside’ collateral.
What type of information is needed to acquire and finance a business properly? The basics include a business plan, a breakdown of how the loan proceeds will be used, financial statements for the business, and a cash flow statement. Remember also that the business acquisition loan is often a ‘ term loan’ and you will more likely also need a business line of credit.
Small transactions under 500k can often be completed under the Canadian Govt Small Business Loan program. It places emphasis on the assets and leaseholds of the business, and is not a cash or working capital loan.
If you’re focused on the benefits of buying a business seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with the knowledge and that special ‘edge’ of expertise required to value and finance a business properly.
7 Park Avenue Financial : http://www.7parkavenuefinancial.com
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 100 Million $ of financing for Canadian corporations . Info /Contact :
7 PARK AVENUE FINANCIAL = CANADIAN BUSINESS ACQUISTION LOAN FINANCING EXPERTISE
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Office = 905 829 2653
‘ Canadian Business Financing With The Intelligent Use Of Experience ‘
ABOUT THE AUTHORStan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
7 Park Avenue Financial
Canadian Business Financing