YOUR COMPANY IS LOOKING FOR ACQUISITION FINANCING FOR
A BUSINESS PURCHASE /MERGER/ACQUISITION!
LEVERAGED FINANCE SOLUTIONS FOR BUYING A BUSINESS IN CANADA
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Acquisition loan needs arise quickly when you or your firm has found the right business to purchase or merge within Canada. Leverage finance loans/high yield financing and other financial solutions for acquisition finance can provide the necessary capital to conclude a business purchase successfully. Typically acquisitions in the SME/SMB sector in Canada will not qualify for investment-grade financing solutions in ' capital markets ' and the ' private equity ' space, so other options must be considered outside the rarified air of investment banking! Let's dig in.
WHAT TYPE OF BUSINESS ARE YOU PURCHASING?
Naturally, the stage or condition in which your ' target company ' is in varies -it might be a smaller firm doing well or a larger firm experiencing severe business challenges, not the least of which might be cash flow or profit shortages.
4 KEY ISSUES TO ADDRESS WHEN BUYING A BUSINESS & FINANCING ACQUISITIONS
Buying an existing business in any condition, large or small, comes with complications. At the heart of what you need to address are key issues such as:
Valuation / Purchase price
Negotiation
Employee/Culture issues/Management team
And finally... FINANCING!
THE BENEFITS OF BUSINESS ACQUISITIONS
The risks around completing a transaction incorrectly are, of course, significant - including, of course, financial loss. However, the reasons to complete a business purchase successfully are compelling - they might include:
Enhancing personal income and net worth
Acquiring business assets at an attractive price
The ability to compete more effectively in your industry
THE ISSUE OF DEBT CAPITAL AND LEVERAGE IS CRITICAL
The concept of leverage finance loans is a compelling one. Although the term might mean different things to different people, we're talking here essentially about using the right type of financing and debt - in some cases, more than might be typical to acquire a business. In some cases, the debt you take on with higher interest rates will be more costly than ' traditional' bank debt, more commonly associated with buying a business.
A KEY BENEFIT OF LEVERAGE AND FINANCING ASSETS
The good news about alternative debt and higher than normal leverage is that often it allows you to complete a transaction. Then after an interim period, you can ' rebalance ' the balance sheet with other forms of financing, perhaps lower-cost bank loans, etc.
In some cases, the debt you might take on is ' mezzanine ' in nature - secured by ' assets ' or ' cash flow' with rates in the ' teens '; this appeals to smaller businesses that can't access the bank or stock market capital. In cash flow financing, you can anticipate higher basis points in your interest calculations.
KEY REQUIREMENTS FOR PURCHASING A BUSINESS
Think of your proposed transaction as having ' layers ' of financing, but always ensure that your business plan and cash flow addresses the realistic ability to repay /service the debt. 7 Park Avenue Financial business plans meet and exceed bank and lender requirements in the area of leveraged loans. A good part of any cash flow will always be going to repay debt in an acquisition - so clarity is key.
WHAT TYPES OF LOANS CAN YOU UTILIZE TO FUND A BUSINESS PURCHASE
The exact nature of whom and what you are purchasing will dictate what type of financing is needed. It might be monetizing assets through asset-based loan agreements, utilizing the Govt guaranteed business loan, or cash flowing assets such as receivables, inventories, tax credits, equipment refinancing /leasing, etc. It's important to note that the government loan program is not a working capital credit facility or a cash flow, but a loan secured by assets, leasehold, etc.
It is important to ensure you address future working capital needs and credit facilities in the context of your goals to run and grow the business in the new capital structure you have created at an interest rate and cash flow assumption acceptable to yourself and your lender/lenders. So, long-term business needs must always be considered - whether it's mezzanine financing or asset monetization. In the SME COMMERCIAL FINANCE sector, business owners' credit rating and personal net worth are always a considered factor. It's not always about those balance sheets!
In some cases, mezzanine debt financing ( aka ' cash flow loans ' ) will complement a term loan and allow you to complete the transaction within a true leveraged buyout structure. Of course, those loans around anticipated cash flows come with maintenance covenants and balance sheet ratio requirements around your proposed business operations. Future capital expenditures for assets or technology required should also be considered.
Utilizing a private equity firm will always dilute your owner equity. Those types of transactions tend to be outside of the SME acquisition marketplace for funding deals and are close to investment-grade companies - those types of financial sponsors are typically reserved for the mega transactions via hedge funds, high yield bonds, insurance companies, mezzanine funds, private equity firms, debt capital markets, etc. and are quite outside small and medium-size business acquisitions. Second lien financing is prevalent in the United States but rarely used in the Canadian business financing marketplace.
CONCLUSION
If you're looking to ' SOLVE ' acquisition financing loan needs with the right types of leverage finance loans or other financing vehicles which are ‘ time tested ‘while minimizing risk and maximizing opportunity, consider seeking out and speaking to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you with different types of finance solutions, document issues within Canadian business credit markets.
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Stan Prokop
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