YOUR COMPANY IS LOOKING FOR A CANADIAN BUSINESS FINANCING ADVISOR
FOR MERGER & ACQUISITION OPPORTUNITIES
Acquisition Financing For Mergers And Acquisitions
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
CONTACT US
EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
BUSINESS ACQUISITION LOAN SOLUTIONS IN CANADA
Business financing in Canada. Going it alone benefits business and life, but not necessarily so when you lack the assistance and expertise to complete the financing you need for a business acquisition.
That’s when a (good) advisor or intermediary is worth their weight in gold. And he who has the gold...! So, how Do You Finance An Acquisition? Let's dig in!
Bridging the Acquisition Gap: Finding Your Financing Path
Acquiring a business in Canada often presents a significant financial challenge, leaving many entrepreneurs unable to capitalize on valuable opportunities. The complex maze of lending criteria, application processes, and approval timelines can derail even the most promising acquisition plans.
Let the 7 Park Avenue Financial team show you how specialized business acquisition financing solutions exist that can help you navigate these challenges effectively and provide the capital needed to turn your acquisition goals into reality.
YOUR FINAL GOAL ON BUSINESS ACQUISITIONS?
The initial goal seems clear: make an intelligent decision on purchasing or merging with a target, achieve the right price via negotiation, and then complete financing as needed.
IS THE SME SECTOR UNDERSERVED WHEN IT COMES TO BUYING A BUSINESS
Part of the challenge is that top experts agree that the SME sector in Canada, the huge ‘small to medium enterprise’ segment comprising hundreds of thousands of firms, is somewhat underserved.
Bigger and or public companies tend to have all the advisors and assistance they need. However, the Canadian business owner or manager looking for reasonably priced but expert assistance is somewhat underserved.
It's apparently a free country though, and you can go it alone but that seems mostly driven by a distrust of sorts of the type of expert advice that is out there, and at what cost.
HOW DOES A BUSINESS FINANCING ADVISOR HELP?
So, how can the right intermediary or advisor help? It boils down to several key areas, including helping you validate criteria, putting and analyzing the proper information together, presenting a deal structure that works, and finalizing the finances you need.
So, by now, it should seem clear that an expert—that ' expertise '—is key to picking someone to work with you.
LOOK FOR A TRACK RECORD
A good way to do that is to ask for the TRACK RECORD of transactions closed and completed, along with the type.
That record of success will hopefully reflect the size of deals completed, a reputation of professionalism and confidentiality, and the ability to interact successfully and professionally with everyone involved in your deal or financing with another company.
Certain advisors or intermediaries might request ' exclusivity ' on the deal. That's certainly okay and happens a lot; we're personally in favour of people getting paid for tangible results—end of story.
7 PARK AVENUE FINANCIAL WORKS ON A SUCCESS FEE BASIS
The issue of fees /overall compensation/ work fee—retainer can sometimes become a stumbling block for all parties, understandably so.
What can you do to address these sorts of points? Numerous structures are available to ensure everyone feels comfortable with who they are dealing with and how success will be measured.
WHAT IS THE VALUE OF AN INTERMEDIARY SUCH AS 7 PARK AVENUE FINANCIAL IN BUSINESS ACQUISITION FINANCE
The issues around the overall price and value of the compensation of an advisor or intermediary boil down into several categories. They include:
Time spent on any transaction
The level of the overall commitment to a deal or financing
The overall risk and reward of getting a deal or financing done, or not done!
Any deal can incorporate the concept of ‘incentive ‘as well as useful information, advice, etc.
Ideally, you want to work with someone who is either with or can work on a first-name basis with key players in your transaction.
Reputation, specialization, and experience, of course, create a clear message that a successful deal or financing can be completed in the shortest amount of time possible.
2 KEY AREAS OF FOCUS
Financing contacts and reputation, negotiation skills, unbiased advice that is not self-serving, setting reasonable expectations, and avoiding conflicts of interest.
Also key is the ability to evaluate and present the financials on any deal positively to ensure a positive financing structure for success.
As you can imagine, a lot of time can be spent on ‘financing ‘that was never really meant to be. The ability to source and present real and available funding is key.
Along the way, the intermediary or advisor should provide some strong financial/cash flow analysis, business plan preparation, and purchase price valuation assistance in the form of a third party looking at your transaction.
CASE STUDY
When a Canadian manufacturer faced a critical succession challenge as its founder prepared for retirement, traditional financing options seemed inadequate for the management team's buyout plans. The company's specialized equipment and significant growth opportunities made it an attractive acquisition target, but standard bank terms would have severely limited working capital during the transition.
By developing a customized acquisition financing package combining senior debt, equipment financing, and subordinated capital, the management team completed the acquisition while maintaining sufficient operating capital.
CONCLUSION - HOW TO FINANCE A BUSINESS ACQUISITION
So at the end of the day, consider that the real value of an advisor or intermediary is the time and experience to get a successful business acquisition done or on track –
Call 7 Park Avenue Financial, a trusted, credible, and experienced Canadian business financing advisor, to assist you with your financing, acquisition, or merger needs.
Let's approve financing for your goals around acquisition financing work!
FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK / MORE INFORMATION
What is acquisition financing?
Acquisition financing is business funding focused on the goal of acquiring another company. Regarding business acquisition financing in Canada, the opportunity arises for a business to benefit from existing operations and economies of scale.
A combination of equity financing, contribution, and business acquisition loans to buy an existing business will create the optimal financing structure for purchasing a target company. Acquisitions can be funded through term loans, leveraged buyouts, and other senior debt financing.
Sometimes, lenders will ask for financial covenants around debt and working capital, a sizeable down payment, and potential maintenance of cash reserves. Private lenders versus traditional financing institutions might also be an option for business acquisition.
How much down payment is typically required for business acquisition financing?
In Canada, down payments range from 10% to 30% of the purchase price, depending on the industry, type of business, available collateral, and lender policies. Service businesses with fewer tangible assets often require higher down payments, while asset-heavy businesses may qualify for lower down payment requirements.
What is the best way of financing the acquisition?
Acquisitions are financed via debt and owner-equity contributions to the transaction. When additional funds are required, third-party business lenders such as banks as a senior lender, commercial non-bank firms, and government loans and BDC acquisition financing can help finalize the transaction. Business lines of credit around accounts receivable and inventories, as well as equipment financing, might be used to augment or preserve working capital and fund the acquired business on an ongoing basis. Mezzanine financing, aka ' cash flow financing,' will often be the final piece of the acquisition puzzle and must be proven by the business's future cash flow to maintian monthly payments on loans.
When raising equity/debt, cash flow loans must demonstrate strong cash flows in the firm's financial statements for a smooth ownership transition.
Financing challenges for acquisitions exist when intellectual property or goodwill requires financing, although some financial providers will consider all the company's assets, even the intangible assets, for financing purposes. Asset-based lending will help close a leveraged buyout transaction when owner financing will not provide enough financial resources to close a business purchase.
How do you finance a business purchase?
A business purchase is often financed with a combination of financing via acquisition financing lenders - Components of a business acquisition funding might include personal funds for an additional equity injection from the buyer, government loan assistance, as well as vendor note takeback/seller financing . A bank loan is typically structured under a term loan structure for the actual company acquisitions - variable rate loans might also be offered by banks , as well as fixed rate financing.
Can SBL/Government loans be used for acquisitions?
The Canada small business financing program is a government loan program similar to SBA loans in the U.S. - The federal loan program can be used to buy a company or a franchise under existing limits of 1.1 Million dollars. Recent changes in 2022 to the program make it a good tool to consider using for a small business purchase.
Is it hard to get a business acquisition loan?
It can be challenging to get a business acquisition loan in Canada to purchase another business. Banks and non-bank business lenders look for a combination of business expertise in the owner's background and reasonably strong personal finances.
What are the steps in the acquisition process?
The acquisition process revolves around a focused strategy on identifying a target business to purchase as well as ensuring the proper valuation around the purchase price . Negotiations with sellers and finance firms and banks require expertise and a time investment with a focus on closing the transaction successfully . Ensuring the optimal finance structure will help ensure a successful closing around the approval process, and integration of the new business going forward.
Where can I find specialized lenders for business acquisitions in Canada?
Specialized business acquisition lenders in Canada can be found through chartered banks with commercial divisions, credit unions, Business Development Bank of Canada (BDC), private equity firms focusing on acquisitions, industry-specific lenders, and specialized firms such as 7 Park Avenue Financial ,who focus on matching acquisition transactions with appropriate capital sources.
What advantages does seller financing provide in business acquisition deals?
Seller financing provides significant advantages in business acquisition deals through flexible payment terms, reduced third-party financing requirements, and demonstrated seller confidence in business sustainability. This financing approach often eliminates expensive bank fees, accelerates the closing process, and creates a vested seller interest in ensuring smooth transition. Additionally, seller financing typically involves less rigid qualification requirements than traditional lending options.
What documentation do I need to prepare before applying for business acquisition financing?
Documentation preparation for business acquisition financing includes three years of financial statements for the target business, detailed business valuation report, comprehensive business plan with post-acquisition strategy, personal financial statements, proof of down payment funds, purchase agreement (or letter of intent), and industry experience verification. Most Canadian lenders also require current accounts receivable/payable aging reports and equipment appraisals when applicable.
Citations / More Information
- Business Development Bank of Canada. (2023). "Business Acquisition Financing Guide: Options and Strategies for Canadian Entrepreneurs." Retrieved from BDC Research Publications. Main website: https://www.bdc.ca
- Canadian Bankers Association. (2023). "Commercial Lending Trends Report: Focus on Acquisition Financing." Journal of Canadian Banking, 45(2), 112-128. Main website: https://cba.ca
- Statistics Canada. (2022). "Business Succession and Financing in Canada: Trends and Challenges." Government of Canada Economic Insights Report. Main website: https://www.statcan.gc.ca
- KPMG Canada. (2023). "Canadian M&A Financing Landscape: Strategic Options for Business Buyers." Corporate Finance Advisory Report, Toronto. Main website: https://home.kpmg/ca
- Deloitte Canada. (2022). "Alternative Financing Strategies for Middle Market Acquisitions." Business Transaction Advisory Services Whitepaper. Main website: https://www2.deloitte.com/ca
- Royal Bank of Canada. (2023). "Business Acquisition Financing: A Guide for Canadian Entrepreneurs." RBC Small Business Resource Center. Main website: https://www.rbcroyalbank.com
