YOU’RE LOOKING FOR ACQUISITION FINANCING ASSISTANCE!
BUYOUT AND ACQUISITION FINANCE SOLUTIONS IN CANADA
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Financing a business acquisition, or merger can be accomplished in a number of ways in Canada. In fact, 5 obvious methods of acquisition exist, and yes, here's one thing you need to know about them - They all work. Let's dig into financing the purchase of an existing business.
WHY PURCHASE AN EXISTING BUSINESS?
When it comes to purchasing an existing business we think it's all about knowing your alternatives. Entrepreneurs who wish to purchase a business understand that buying, ( or turning around ) an existing business can often happen a lot more quickly than organic growth or starting from true ' start-up' mode where cash flow success is key.
FINANCING IS A CHALLENGE IN BUSINESS ACQUISITIONS & TAKEOVER FINANCING
Those same entrepreneurs also often quickly realize that it's not that easy to finance the purchase through what some might term ' traditional ' sources of capital when it comes to business acquisition loans - a lot of that having to do with tightening of business credit since the 2008-2009 global financial meltdown, and let's not even talk about Pandemics/Covid!... when you're looking for a loan to buy a business.
THE PERSONAL EQUITY / DOWN PAYMENT CONSIDERATION IN COMPANY ACQUISITION
It might seem too obvious but in fact, one of the ways to finance the purchase of a company is via personal savings relative to the purchase price. We think the best route to follow is to ensure you have a good ' combo' of both personal equity and additional 3rd party financing. That often leaves you with the right combination of both ' debt' and ' equity ‘- too much of either is rarely good when financing a business.
SHOULD YOU PUT ALL YOUR PERSONAL COLLATERAL AT RISK
Naturally, a lot of risks are eliminated when significant personal finances are utilized. but putting all your personal capital at risk also has its downside! It should be also mentioned that 3rd party financing often, (but not always) requires a solid equity component as well as financing acquisition with debt.
SELLER FINANCING /VENDOR TAKEBACK IS A COMMON STRATEGY .. THAT WORKS!
An obvious form of financing a business acquisition opportunity is often not that obvious. It's financing via the seller, via a ' VTB' - its seller financing via a vendor take back. Your ability to structure a transaction creatively is unlimited when it comes to working with a responsible seller who is motivated to participate in the successful financing, often at the risk of giving up some of the tax benefits that come with his or her sale of the business.
MORE SOPHISTICATED SOLUTIONS TO CORPORATE ACQUISITIONS
Want to waste a lot of time in financing a business opportunity. Hands up for that one! What we're referring to the endless search we've seen many clients take on in dealing with Private Equity, Venture Capital, and Angel Investors relative to financing the purchase or merger of a business in the Commercial SME sector in Canada. Our quick summary on that one? Simply that those sources of finance are meant for much larger transactions in the millions and tens of millions, take a lot of time to consummate and have some stringent requirements around the financial criteria.
CAN YOU UTILIZE A GOVERNMENT GUARANTEED LOAN TO BUY A BUSINESS
Going to the other end of the extreme have you considered the Canadian government as a partner in financing an acquisition. That is accomplished very nicely via the Govt BIL/CSBF program which provides financing up to1 Million dollars for transactions. It's a great source of financing for SME type transactions. and can also be utilized for existing franchises.
Any proper business loan application should include a proper business plan. 7 Park Avenue Financial prepares business plans that meet and exceed the requirements of bank and commercial lenders.
BANKS AND ASSET BASED LENDERS ARE THE MOST COMMON ACQUISITION FINANCE SOLUTIONS
Canadian chartered banks and commercial financing companies (Asset-based) also provide financing under criteria relating to assets, leaseholds, current capital structure, and current operating success of the business. Asset-based financing can often properly be accomplished via an ABL facility that monetizes current and fixed assets for cash flow superiority and puts in a total finance structure that makes sense to your transaction.
CONCLUSION
There you have it - 7 Park Avenue Financial has identified 5 solid methods behind the financing of business purchase in Canada. When you are looking to finance an acquisition make sure to seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your acquisition finance needs.
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Stan Prokop
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