YOUR COMPANY IS LOOKING FOR BUYOUT FUNDING!
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
Business acquisition financing in Canada needs a better storyboard. Buyout finance opportunities exist all the time in the Canadian business landscape. Certainly buying a business and either growing it or turning it around is an exhilarating experience. What works and what doesn't for the would-be buyer/owner? From everything such as leveraged buyouts to traditional term loan financing - Let's dig in!
HAVING THE TOOLS TO SUCCESSFULLY FINANCE THE ACQUISITION
Proper acquisition finance around your target company purchase price should be done strategically - making sure the right tools and agendas are in place to make the new business work under a proper financing structure.
If you're either an entrepreneur looking to buy a business or a current business owner looking for diversification and non-organic growth that typically is driven by sales and profit motives. When you enhance the value of another business both revenues and profits will grow if managed properly.
BUYING THE UNDERVALUED BUSINESS
Numerous clients come to us at 7 Park Avenue Financial with what they feel are ' undervalued' situations. Some of those can become overvalued if not dissected properly. Most businesses in the SME sector in Canada tend to be purchased or bought in a somewhat ' friendly ' negotiation. SME is rarely a hostile takeover environment.
A lot of the focus on your initial pricing and the value of the business you are looking at will always come back to cash flow. That cash flow is going to come out of how you will manage the business relative to current assets (inventory and A/R) as well as the financing you need for current and future investment.
How then does the purchaser/buyer create that ' storyboard' we've been talking about? It's done by taking a close look at finance operations - that includes gross margins on sales, expenses, and the turnover of assets.
Business purchasers often go wrong when they don’t spend enough time on the required investment in new assets needed. That could be technology, plant equipment, vehicles, etc. All of those will require financing, which can typically be properly funded via equipment finance. The cash flow required to make those payments must be taken into account in your cash flow analysis of the acquisition.
Sales in most companies always come back to a working capital requirement. This is the balance that comes from managing your payables and vendors as well as collecting receivables and purchasing inventory/goods.
Here's a quick way to look at that. Let’s say a company has 100,000 dollars in current assets and 80,000 dollars in current liabilities. That business has a working capital position of 20,000 dollars. Bottom line? For every dollar of sales, your business needs 20 cents of working capital. You need to project that out into your future sales growth. Keep your ' capital turnover cycle' top of mind.
ANSWERING 3 KEY QUESTIONS IN BUYING A BUSINESS
What are those key storyboard questions you should be asking yourself? They include:
What debt levels are in place or needed?
What amount of owner equity needs to be in the business at the time of purchase?
Are short term solvency issues a critical item? What type of financing can be put in place to solve those?
HOW IS WORKING CAPITAL FINANCED IN A BUSINESS ACQUISITIONS
They might include:
RECEIVABLE FINANCING
INVENTORY FINANCE
BANK OR NON BAN LINES OF COMMERCIAL CREDIT
Remember the maxim ' Growth penalizes Cash ' when you're planning an acquisition for growth IN the small business environment. That punishment can be brutal.
HOW DO YOU FINANCE A BUSINESS ACQUISITION
Methods of acquiring a business in Canada through acquisition financing lenders include_
GOVERNMENT SBL LOANS
BRIDGE LOANS
ASSET BASED LINES OF CREDIT - funding the assets of a business
BANK TERM LOANS
LEVERAGED BUYOUT FINANCING
PRIVATE EQUITY
SELLER FINANCE - vendor financing will always help finance a transaction
CONCLUSION
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your buyout finance needs when you are looking to finance an acquisition.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2021/Rights Reserved
