YOU ARE LOOKING FOR BUSINESS ACQUISITION FINANCING
AND VALUATION ASSISTANCE!
How To Buy A Business & Get A Loan
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
Canadian business owners and financial managers will not always meet their personal and corporate goals through organic growth - as a result, they seek to buy and acquire a business to further those goals. But, how to get an acquisition loan to buy a business? That's a common new client question here at 7 Park Avenue Financial.
VALUATION AND FINANCING
Valuing and financing that new business is a good idea, and what it's all about - and we're talking about the ' right ' financing for purchasing that existing business.
VALUING THE ASSETS IS KEY
There are some strong basics you can follow to ensure that acquisition is done properly, meeting your goals and not putting you at risk. On certain occasions, the value of the assets you’re are acquiring and financing can make, or break your deal. Keep in mind and make sure you're focused on determining true asset values, which on certain occasions may even require a third party appraisal.
BOOK VALUE / MARKET VALUE / GOODWILL
Those assets are reflected at ' book value ' in the financials and may have significant real-world swings up or down when it comes to financeability. Oh and by the way, when those assets are a lot less than your agreed-upon price the GOODWILL aspect of your financing becomes a major challenge.
At 7 Park Avenue Financial we are often asked to help with the actual cash flow and valuation around transactions in the SME sector. It's sometimes dangerous to generalize but businesses in that sector would typically sell for 2-5 times proven cash flow. Keyword: proven!
FINANCING YOUR ACQUISITION
The challenge then becomes putting the financing in place that achieves the acquisition finance goals. Where does that financing come from? It can come from a variety of solid solutions - they include of course our Canadian commercial banks ( good financials required please ), but alternate sources that work well include the Government Small Business Loan, asset-based lending facilities that monetize the assets we've discussed, equipment lessors or a bridge loan of sorts, and even more creatively, a partial vendor take back. Quite often negotiating some co-operation and assistance on a VTB or earn out of some sort is the final piece of the puzzle. Financing can be in the form of a business bank type solution or the newer world of alternative financing that is 'non-bank' in nature.
The term of a business loan will vary with the type of financing that you have in place, which might be a government SBL loan, bank term loans, or equipment and asset loans. Short term operating funding might be financing in the areas of business lines of credit, invoice financing, or short term working capital loans.
YOUR CHECKLIST FOR BUSINESS ACQUISITIONS
Is there a short checklist of some other key issues? You knew there were! They include:
- The ability to deal with existing banks or lenders of the firm you are acquiring
- Your personal financial credit history/experience/background
- Industry visibility re competition, etc
- Supplier /vendor issues re existing sales, contracts
- Current managers/employees
IT'S ALL ABOUT THE ' CASH FLOW '!
A lot of financing around an acquisition focuses on cash flow and companies with good cash flow bring in higher valuation and even higher chances of successful financing. It doesn't matter what type of business you are buying , even a franchise - it 's all about ensuring the flow of funds and understaning the operating cycle of the company.
SHARE SALE VERSUS ASSET SALE
'SHARE SALES ' are difficult, if not impossible to financing in Canada, certainly in the SME (small to medium enterprise) market because liquidity cannot be attached to those shares.
DON'T FORGET TO LOOK INTO THESE KEY FACTORS
Other key factors that will probably affect your financing success include the cyclicality of the business, current financial progress/success, our prior mentioned cash flow, as well as existing debt that you will have to wrestle down, manage, and address. You want to ensure loan repayment ability.
The well-informed business owner will also ensure they have a good business plan and cash flor projection in place for their financing discussions. At 7 Park Avenue Financial we prepare business plans that are realistic and meet and exceed the requirements of Canadian business lending when it comes to a loan application and the need to provide financing.
CONCLUSION
So, buy a business that you want? The right financing in place.? High stakes poker ? ! In many cases the ability to buy an existing business is in fact easier than funding a start-up given that track records and industry positioning and success are already in place. That track record is very important to business lenders!
It certainly doesn’t have to be when it comes to the value of the business and the purchase price - so seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your valuation and financing needs.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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