YOU’RE LOOKING FOR FINANCING TO PURCHASE A BUSINESS!
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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
Use a Government small business loan, aka, the ' SBL' to finance a business acquisition purchase in Canada? Absolutely, and by the way, this is not something new, simply a tried and true way to purchase a business in Canada, including franchises. Let's dig in.
Small is always relative (we’ve found), so we're talking about purchasing a business with revenues under 10 Million dollars annual sales.
WHY BUY A BUSINESS?
Why would an entrepreneur or existing business owner purchase a business as opposed to starting one organically? One reason is pretty simple - the risk is often minimized significantly if (and it's a big ' if ‘) the proper research, due diligence and financing is undertaken.
Pricing the cost of the acquisition
There are, of course, some intangibles that come into your overall business acquisition decision - they include areas such as management depth and experience of owners, industry conditions, etc.
USE THE CANADA SMALL BUSINESS FINANCING PROGRAM TO BUY A BUSINESS
But at the end of the day, a financing challenge always looms, and the Canadian Government Small Business Loan, via Industry Canada's program, underwrites many thousands of business purchases every year. Those businesses also can include existing franchises in the booming Canadian franchise industry.
KEY BENEFITS OF GOVERNMENT GUARANTEED LOANS
Business terms, rates and structures under the program are both attractive, and competitive. They include an interest rate in the single digits, nominal personal guarantees, repayment without penalty, and long amortizations if in fact a longer repayment term is required. Interest rates are a key part of the program and can be fixed or variable - small business can rarely capture such a good interest rate given the nature of a start-up or small business purchase. You can also choose which financial institution you want to work with, typically a bank or a credit union designated by Industry Canada, which sponsors the program.
Note there is a one-time registration fee at the start of your loan.
VALUATION AND CAPITAL STRUCTURE
Valuation is key in determining a financing structure that makes sense for the capital structure of the business. That capital structure is basically two components - debt and ownership equity. Purchasers should well be advised to consider a business financing advisor to help on valuation - as key issues around return on investment, cash flow, and asset appraisal are key to solid and successful financing.
WHERE TO GET BUSINESS FINANCING ADVICE ON YOUR ACQUISITION
It's important to note that your lawyer, accountant, or business broker's valuable business advice can provide potentially valuable assistance.
WHAT DOES THE GOVERNMENT LOAN FINANCE?
When utilizing the SBL loan in the acquisition finance purchase decision it’s critical to know what the program in fact does not finance. Those seeking financing for intangibles such as franchise fees, advertising, etc will be disappointed - the program only finances two categories of assets - equipment and leaseholds. By the way, the programs max out at 350k, but other sources of financing can often complement a total finance solution approach.
CONCLUSION
Funding a business purchase for a small business can be challenging. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor if you're focused on a successful business purchase financing experience.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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