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How Do You Finance A Business Purchase ? Like This !
Business acquisition financing in Canada comes with several myths and when it comes to arranging finance for buying a business there are some key basics every business owner / entrepreneur needs to know . It's easy to get bogged down in the legal and accounting jargon sometimes so here at 7 Park Avenue Financial we strive to give you the layman's version - in plain English!
Business value and how companies are valued are key in a successful business purchase and financing. The pro's talk about ' future cash flows' and ' earning potential ' but the formulas and calculations around these can sometimes be a little overwhelming . For a starter this area of buying a business is key and should always require some third party input from a business pro. While future earnings are key there are a number of other areas that require your focus - including ' what are the cash flows today '!
Assets are a key part of any business purchase . More and more businesses today have ' soft assets ' which often makes valuation even harder . These typically aren't treated the same as hard assets , which can be more precisely appraised and valued. The bottom line is that you have to look at each asset, soft or hard, in the context of what they do for the business.
We can't count the number of times new business financing clients have told us they feel they ' over paid ' for the company they now own and run. It's clear to us they never looked at each asset under the telescope , or even more precisely , ' under the hammer '. That ' hammer' refers to the idea of liquidation of auction value of what an asset might bring under auction. Inventories and accounts receivable are also key aspects that require significant due diligence . You need to know those ' liquid assets ' ( A/R + Inventory ) are moving cash through the business. This can often easily be measure by applying basic '
' days sales outstanding' and ' inventory turnover' ratios to your analysis.
Hard assets often naturally enhance the value and financeabilty of the business. A winning combination is good assets and good cash flows from those assets.
Proper disclosure from the seller is a final point to focus in on - Beware of sellers with dark sunglasses! That of course refers to sellers who choose to keep buyers in the dark, and a purchaser who does not prepared to do proper due diligence . Can a deal be done in the dark? Absolutely ! Will it be a successful deal for both parties? Probably not.
There's an old saying that the best deal /negotiation is when both parties feel they didn’t get all they wanted, and there’s probably a lot of truth in that.
How To Finance A Business Purchase In Canada
SBL Govt loans
Asset based lending
Bank term loans
Bridge loans
Cash flow loans - secured/unsecured
Seek out and speak to a trusted, credible and experienced Canadian business financing advisor with a track record of business finance success who can help you with business acquisition financing.
7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.
Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.
Stan Prokop
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