Business Acquisition Financing In Canada : Finance Solutions Not Built On Sand

Opening The Wallet On Financing Acquisitions In Canada In The Sme Commercial Market

OVERVIEW – Information on business acquisition financing solutions in Canada

Business acquisition financing in Canada, when successful, requires that the finance component of the transaction be not built on sand. Strength is needed in this area, so lets ' open the wallet ' on acquisitions acquired properly. Let's dig in.

There are numerous methods of acquiring a business and raising the right amount of capital to finance the transaction - One of those that is less known to business folks is ' subordinated debt ' - in effect an unsecured cash flow loan.

While a cash flow loan is almost always more expensive than traditional bank term loans it is more flexible and can often carry a large part of the total financing needed to complete a deal. This loan ranks 2nd behind any secured debt, hence it's ' subordinate' to the secured finance part of the transaction.

If the loan is ' unsecured ' how then does the lender, i.e. a commercial finance company or a bank, view chances of repayment. Here it's down to 2 words - ' CASH FLOW'.

So if you're contemplating a cash flow loan as a part of your deal it's safe to say you should spend some time on:

Past cash flow analysis

Present Cash Flow

Future projected cash flow (by the way - we' never met a projection we didn't like ' said one of our mentors)

Why would owners/financial managers consider a cash flow loan for business acquisition financing? Simply because 100% secured asset financing might not be possible, and the other alternative, ' owner equity' is less desirable because it’s either unavailable from the owners, or more dilutive.

Many times in business owners/managers find a situation whereby they can acquire a competitor or a strategic partner. The valuation price on the deal might be more than the assets can support - especially if current owners do not wish to be a part of the financing via some sort of 'vendor take back.' In many cases a cash flow loan might not be a part of required debt and other ratio covenants.

Other sources of capital available for financing a purchase include:

Government Guaranteed Business Loans

Asset Based term loans/lines of credit

Equipment Financing/Sale Leasebacks

Receivables/Inventory Finance

Whether it's an opportunistic transaction you come by or a sale of a business as part of the ' graying effect ' of older business owners the financing of a transaction, done successfully, can make your firm more strategic and competitive in your industry.

So whether it's about cash flow, assets, profits, or sales growth consider seeking out and speaking to a trusted , credible and experienced Canadian business financing advisor who can assist you with your acquisition finance needs.



Stan Prokop - 7 Park Avenue Financial :

http://www.7parkavenuefinancial.com

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 90 Million $ of financing for Canadian corporations . Info /Contact :


7 PARK AVENUE FINANCIAL = CANADIAN BUSINESS ACQUISTION FINANCE EXPERTISE



Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?
CONTACT:
7 Park Avenue Financial

South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Office = 905 829 2653



Email = sprokop@7parkavenuefinancial.com


' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop

Business Acquisition Financing Shouldn't Be Harrowing. When Buyout Finance Works Properly

Here’s Your Storyboard For Buying A Business

OVERVIEW – Information on business acquisition financing in Canada . What info and analysis makes a good buyout finance strategy successful






Business acquisition financing in Canada needs a better storyboard. Buyout finance opportunities exist all the time in the Canadian business landscape .Certainly buying a business and either growing it or turning it around is an exhilarating experience. What works and what doesnt for the would be buyer/owner? Let's dig in.

Proper acquisition finance should be done strategically - making sure the right tools and agendas are in place to make the new business work.

If you're either an entrepreneur looking to buy a business or a current business owner looking for diversification and non organic growth that typically is driven by sales and profit motives. When you enhance the value of another business both revenues and profits will grow if managed properly.

Numerous clients come to us with what they feel are ' undervalued' situations. Some of those can become overvalued if not dissected properly. Most businesses in the SME sector in Canada tend to be purchased or bought in a somewhat ' friendly ' negotiation. SME is rarely the hostile takeover environment.

A lot of the focus on your initial pricing and value of the business you are looking at will always come back to cash flow. That cash flow is going to come out of how you will mange the business relative to current assets (inventory and A/R) as well as the financing you need for current and future investment.

How then does the purchaser/buyer create that ' storyboard' we've been talking about? It's done by taking a close look at finance operations - that includes gross margins on sales, expenses, and the turnover of assets.

Business purchasers often go wrong when they don’t spend enough time on the required investment in new asset needed. That could be technology, plant equipment, vehicles, etc. All of those will require financing, which can typically be properly funded via equipment finance. The cash flow required to make those payments must be taken into account in your cash flow analysis of the acquisition.

Sales in most companies always comes back to a working capital requirement. This is the balance that comes from managing your payables and vendors as well as collecting receivables and purchasing inventory / goods.

Here's a quick way to look at that. Let’s say a company has 100,000 dollars in current assets and 80,000 dollars in current liabilities. That business has a working capital position of 20,000 dollars. Bottom line? For every dollar of sales your business needs 20 cents of working capital. You need to project that out into your future sales growth. Keep your ' capital turnover cycle' top of mind.

What are those key storyboard questions you should be asking yourself? They include:

What debt levels are in place or needed?

What amount of owner equity needs to be in the business at the time of purchase?

Are short term solvency issues a critical item? What type of financing can be put in place to solve those?


They might include:

RECEIVABLE FINANCING
INVENTORY FINANCE
BANK OR NON BAN LINES OF COMMERCIAL CREDIT

Remember the maxim ' Growth penalizes Cash ' when you're planning an acquisition for growth. That punishment can be brutal.

Methods of acquiring a business in Canada through finance include_

GOVERNMENT SBL LOANS
BRIDGE LOANS
ASSET BASED LINES OF CREDIT
BANK TERM LOANS

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your buyout finance needs.



Stan Prokop - founder of 7 Park Avenue Financial

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :



7 Park Avenue Financial = Acquisition And Buyout Financing Expertise





7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com

Stan Prokop

Some Obvious Truth Around Business Acquisition Financing . 2 ( Other ) Things You Never Should Forget When Funding A Acquisition / Merger

Avoiding Skeletons In the Closet In Business Finance

OVERVIEW – Information on business acquisition financing in Canada. Funding your merger and acquisition requires not overlooking … the obvious!


Business acquisition financing in Canada. When you are looking for funder for a merger or if you're acquiring a firm remember something we heard the other day - ' Genius is often just pointing out the obvious truth that no one else sees'.

So when we recently talked about some critical aspects you may should not overlook with this type of financing challenge we remembered ... ' Wait ... there's more!”

It's critical in such an exercise to ensure you understand that both yourself and the other firm have somewhat separate agenda's. No question on that one! Simply speaking, it’s important to step outside those agendas, look inside, and ensure you have the right evidence on assets, cash flow, and valuation.

Experts in the field say that trends now show that while there seems to be a lot of businesses available for purchasing and financing many deals simply fade into oblivion. A lot of reasons might exist for that fact- one of them might simply be poor objectives, inadequate financing knowledge. As an acquirer it’s important not to underestimate your capacity to value and finance a deal, as tough as it might seem to admit that.

Many purchasers and sellers have a huge challenge in assessing the issues of existing and future debt in your deal. The amount of debt that is in fact existing, or planned does not necessarily make or break a deal, most experts seem to say that it’s all about two things - hard assets, and cash flows. And by the ways that’s future cash flows that you can reasonably predict!

Remember also that unless you're purchasing a public entity, which certainly doesn't happen a lot in the SME sector the liquidity issue around all those assets and intangibles doesn't really exist. So your challenge is, yes, to understand the value of assets and cash flows, but don’t forget those items such as intangibles! Perceptions of clients and lenders for smaller firms are equally as important.

There are of course some real basic methods to value your acquisition or merger and assess the financing needs. Businesses in the SME sector will typically be valued at a multiple of current cash flows. The time period in which you will be able to retire and pay back debt is also important.

Oh, by the way, don’t forget those skeletons in the closet!

They might include existing financing and credit problems with banks and other lenders, bad publicity, upcoming industry issues, potential loss of major accounts, and overvalued assets.

You do have the financing tools available, to make the ' right ' acquisition. They include-

Government business loan - The ‘SBL’
Asset Based Lending
Bridge Loans
Cash Flow loans
Bank term loans

Hopefully we have pointed out some of those ' obvious ' truths that will make you acquisition and financing more successful. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business acquisition financing and funding needs.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS FINANCING EXPERTISE


Stan Prokop - founder of 7 Park Avenue Financial –

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/business-acquisition-financing-funding-merger.html




7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653

Business Acquisition Financing. 3 Things You Never Should Forget In Funding Your Purchase

Going Behind The Scenes In Buying and Financing A Business


OVERVIEW – Information on business acquisition financing in Canada . Critical aspects of financing any purchase or merger



When it comes to business acquisition financing in Canada there's several myths and things you should never forget when arranging and funding your purchase. Let's try and cover off 3 basics, and we're going to strive to be fairly non technical in nature... which is a good thing, right?

First point is simple the value and valuation. While a lot of people may tell you it’s all about the ' future cash flows / earning ' of the business that might not necessarily always be the case. Part of the challenge here is that the formulas around this calculation probably work best with larger public companies where you probably have a better chance of predicting the future.

So our basic caution is that as a buyer you should incorporate other factors and info into your final value decision; and make sure there are at least some cash flows today. not just ten years from now!

Point number 2 is simply the concept around the assets of the business. These days they can be a combination of hard and soft assets and you can't necessarily treat them the same. So the take away here is that each asset should be analyzed and value in the context of what they do for the business.

When we talk to clients who feel they have ' overpaid' for businesses they purchased and are now running it often becomes very clear that they never looked at each asset ' under the hammer'. That's the term for the idea of liquidation and the value of the asset that it might bring when financed. A good example might be the balance sheet accounts of inventory and accounts receivable. Are they really ' liquid ' and ' moving' respectively, or are they in fact uncollectible and waiting to be written off... respectively!

In general it is safe to say that hard assets do enhance the value and financeability of the purchase. And when you have a combination of hard assets and pretty good cash flows you definitely have found the winning combination.

Our final point pertains to both buyers and sellers and its all about disclosure. One writer referred to it as sellers who keep their dark sunglasses on!

That of course refers to sellers keeping buyers in the dark and on the other side of the coin purchasers opting to stay in the dark without doing the right amount of due diligence. Can a deal be done in the dark? Absolutely ... will it be successful 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.

In Canada you can finance a business purchase via:

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 who can help you with business acquisition financing.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS ACQUISITION FINANCING EXPERTISE



Stan Prokop - founder of 7 Park Avenue Financial –

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/business-acquisition-financing-funding-purchase.html



7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Phone = 905 829 2653
Fax = 905 829 2653
Email = sprokop@7parkavenuefinancial.com