Top Funding Options To Buy An Existing Business In Canada

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LOOKING FOR BUSINESS PURCHASE FINANCING?

ACQUISITION FINANCING

You've arrived at the right address! Welcome to 7 Park Avenue Financial 

        Financing & Cash flow are the biggest issues facing businesses 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

 

Unleashing The Secrets Of Successful Business Purchase Financing

 

THE ART OF SECURING FINANCING OPTIONS FOR  BUYING AN EXISTING BUSINESS IN CANADA

 

 

When business owners and entrepreneurs make the decision to buy an existing business they need some solid info about how to finance  the business purchase transfer for the transaction

 

Funding the business venture purchase is a critical part of buying a business  - Acquisition finance comes in the form of owner business equity financing, as well as loans from traditional or alternative lenders - in some cases complemented by seller financing from the business purchase transfer financing final solution. 

 

KEY FACTORS IN BUSINESS ACQUISITION FINANCING include loan terms and conditions and covenants and personal guarantees, as well as repayment option flexibility - as well as the ever-present focus on the interest rate and financing costs and external collateral.

 

Ensuring effective financing for business ownership for existing businesses allows a smooth business transition with funding that allows for repayment and financing costs based on general market conditions as well as loan terms and conditions that meet the buyer's needs.

 

 

Key Factors in Business Acquisition Financing

 
  Loan Terms and Conditions
  Repayment Options
  Interest Rates
  Collateral Requirements

 

So what are in fact the best ways to execute your strategy on business purchase financing? Let's dig in on expert tips for navigating business purchase financing successfully and choosing the right lender and funding source.

 

In many situations, clients tell us they often have the 'inside track' on a business or company that would accept a good offer based on the current situation of the seller. There are of course various reasons for sellers wishing to divest their business - these days succession and management buyouts are popular reasons.

   

3 GREAT REASONS TO PURCHASE AN EXISTING BUSINESS   

Obviously, there exist key reasons why buying an established company is a solid way to execute your business plans and business acquisition loans.  Key factors to consider buying a business often seem obvious -

Existing revenue and profits

Experienced management and personnel already in place

Elimination of start-up risk

Etc. !
 

 

Buying a business is an effective strategy to attract new and additional clients, as well as the ability to expand capacity, operations and headcount - Typically the company is already established and has a reputation in the market, as well as access to suppliers and distribution logistics.

 

SELLER FINANCING - A DIFFERENT TYPE OF FINANCING FOR BUYING A BUSINESS!

In many cases, some seller financing from the current business owner may in fact prove to be critical in financing your deal. Previous owners remain in a subordinate position via what's known as a vendor takeback, and often the skills and expertise of the seller are valuable in the early stages of the takeover. A seller note for  Business purchase financing for small business is often a great way to help close the transaction and has the potential to lower the down payment of the buyer.
 

 IS BUYING  A BUSINESS EASIER THAN STARTING A BUSINESS?  

A debate sometimes exists, but most experts believe it is easier to arrange funding for an established business. When cash flow and sales are positive they play a key role in establishing the ability to repay business acquisition loans of various types. In many cases franchises are part of today's acquiring of businesses - they have brand and reputation already in place. Qualifying for business purchase finance solutions is often recognized as easier than funding a startup. Understanding the process of business purchase finance is key.

 

THE VALUATION OF A BUSINESS - THE KEY TO UNDERTANDING FINANCING OPTIONS TO BUY A BUSINESS 

 

The concept of business valuation is key in purchasing a company. Higher valuations might in fact mean you have to finance goodwill when most lenders prefer asset financing solutions

We should point out that many businesses that are purchased are in some form of ' distress'. Here valuations are often attractive but the buyer must demonstrate confidence around ' the turnaround'. Valuations can be made through the buyer's own expertise, or you can use the services of qualified business valuators.

What are the key issues in valuation and financing? They include:

Quality of financials

Revenue trends

Cash flow and working capital positions (Throwing off cash is better than using cash!)

When we work with clients we spend a lot of time 'normalizing' those financials to ensure the right assumptions and costs are in place. Factors affecting the interest rate and financing costs will revolve around key areas such as debt load,   or the requirement to fund unsecured loans around intangible assets and goodwill or intellectual property, cash flow, and overall profitability.

In some cases, buyers may wish to obtain an independent business valuation and business advice from a third-party professional, which often happens for larger transactions.

 

  

HOW CAN BUSINESS FINANCING BE ACCOMPLISHED  

 

How do you finance a business acquisition in Canada? That's a question we get a lot at 7 Park Avenue Financial. Funds come from your own equity investment into the transaction,  and a combination of a VTB/ Seller financing component, as well as participation from a ban, commercial finance company, or an asset-based lender.  If the target company has enough assets the transaction can be significantly leveraged. Understanding the factors to consider around on funding of the business is key .

 

Business acquisition loan rates vary due to a number of factors - the size of the transaction, the overall credit quality of the target company, management experience, type of financing utilized vis a vis traditional financing or alternative finance.

 

Government SBL loans can also be used to finance a purchase under 1 Million dollars, which is the cap under the program. It is very rare, in fact, impossible to do a  'no money down' transaction in Canada. The 100% use of  ' OPM ' - other people's money simply doesn't happen

 

The Canada Small Business Financing Program is the equivalent of U.S. sba loans '. These loans are commercial loans using bank financing with the majority of the loan guaranteed to the banks and credit unions  by the government of Canada.  Talk to 7 Park Avenue Financial about how we can streamline the loan application process!  Buyers may also qualify for another type of government financing if they can meet bdc loan / bank loan requirements.

 

Business purchase financing for franchises is a popular use of the program .

 

We also prepare a business plan and projections as required by the government program - Our business plans meet and exceed the requirements of bank and commercial lenders.

The bottom line? Business acquisition finance can be facilitated through :

 

Term loans from traditional and alternative lending sources - credit lines , etc

Government loans

Asset-based loans - business asset financing - Alternative lending options for business - The role of business collateral is a key focus in asset-backed lending

Cash flow loans / Mezzanine financing ( when collateral requirements don't meet all the needs )

Seller financing/vendor take back notes to help complete an optimal financing structure

Commercial mortgages for commercial real estate transactions

 

CONCLUSION - YOUR LOAN FOR BUSINESS ACQUISITION NEEDS

 

Acquisition financing allows you to access business capital to purchase an existing business, including a franchise. Proper financing allows you to meet your entrepreneurial goals with the right financial resources tailored to your particular transaction  and will help you maximize the chances of being approved successfully.

 

"The most important aspect of business acquisition financing is to find the right partner to help you achieve your goals and support your vision." - Bill Gates, co-founder of Microsoft   - Let the 7 Park Avenue Financial team be the financing partner you need for your business

 

Speak to 7 Park Avenue Financial,  a trusted, credible and experienced Canadian business financing advisor with a track record of success in how to finance business acquisitions via business acquisition lenders.

 

 

FAQ FREQUENTLY ASKED QUESTIONS PEOPLE ALSO ASK MORE INFORMATION

 

 How do you finance a business purchase? 

 

Buyers finance a business purchase via a combination of:

 

Personal equity injections

Government Small Business Loans

Seller finance

Bank term loans

Alternative lending sources

 

 

How do small businesses obtain financing?

 

Small businesses obtain financing via traditional and alternative  sources of business funding - that includes a bank loan or loan from another financial institution , financing from commercial finance companies as well as the potential ability to access government loans.

 

 

What is business purchase financing and how does it work?

 

Business purchase financing is a type of  commercial financing using a variety of types of loans to buy an existing business - Funds are used to acquire the assets of a business as well as to provide financing for ongoing operations and growth

 

What are the key factors to consider when evaluating financing options for a business purchase? 

 

Key factors to consider in buying a business include understanding the due diligence process around the evaluation of financial statements, operations of the business, as well as the true value of assets. Operational performance as well as existing liabilities of the business are also important to consider.

 

 

What are the risks and benefits of using alternative lending options versus traditional bank financing? 

Alternative lending options versus bank financing often offer faster turnaround approval times with more flexibility around repayment and overall deal structure. Asset-based lenders will often come at a higher cost but have the ability to provide more financing on a transaction. Buyers of a business should compare traditional versus financial institutions such as banks.

 

 

business purchase financing buying existing business

 

 

Click here for the business finance track record of 7 Park Avenue Financial

Business Purchase Finance And Takeover Financing Solutions In Canada

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Information on buyout financing in Canada, including due diligence and financing strategies to complete a successful acquisition and takeover financing.

How To Get A Loan To Buy A Business In Canada

Business purchase finance in Canada often requires some, shall we say ' deft ' takeover financing strategies when an acquisition is made. This might often include a management buyout scenario. Let's look at some of the acknowledged ' smart ' ways to buy and finance to buy an existing business. Let's dig in.

There are often great rewards when an existing business is purchased properly with the right underpinning of finance and mgmt skill - the challenge is the right loan to buy an established business.

WHY ARE YOU CONSIDERING BUYING A BUSINESS OR A COMPANY BUYOUT?

If it's an add on ( the pros often call it a ' bolt-on ' ) to your current business its obviously a solid mechanism to grow your customer base and that might even mean acquiring a competitor or a vendor with whom you do business with. When executed properly its a solid method of gaining market share, acquiring skilled staff and an infrastructure and business model that is already established. In today's Canadian business environment there is a huge transfer of wealth happening as employees consider management buy outs, businesses consider mergers and acquisitions and family successions are in full force.




Since the turn of the millennium, we have experienced the first ever large-scale transfer of businesses in Canadian history. No matter if we are talking about management buyouts, mergers/acquisitions or family successions, we have a lot more experience today than we did 15 years ago.


At 7 Park Avenue Financial we find many business purchase leads come from business brokers, real estate agents or even online listings of businesses for sale. A business purchase might also be the acquisition of a new or existing franchise.

Financing Options when Acquiring a Business - Business Acquisition Loans In Canada

Different sources of capital might be used to fund a merger or the acquisition of a target company. The overall solutions are known as your final ' capital structure '.In many cases a combination of sources of funding will ultimately lead to a successful transaction, so it's all about the right ' mix ' at appropriate terms, rates, and structure.


Certainly not rare, but typically uncommon is to use your own personal or company cash reserves to purchase a business outright - that is possible but more often than not external financing will be needed when financing acquisitions.

While it is often not considered in the early stages of business financing it will often become apparent that some form of seller financing/vendor finance is required to close the gap in your financing package. This component of your financing has numerous advantages.

Advantages of Seller Finance / VTB

Confirms sellers commitment to the new owner - viewed as a positive by commercial lenders

Assists purchaser in closing the gap in total financing required

Terms of seller financing are often flexible and creative and are sometimes referred to as an ' earn-out '


BANK FINANCING


Industry experts agree that Canadian chartered bank financing is typically available for only higher quality credits. Many larger businesses cannot be financed without the involvement of a bank of a commercial loan firm. Canadian banks place a high emphasis on reasonable personal credit history of the purchaser, industry experience, personal guarantees, and various borrowing covenants and ratios around their financing in the transaction.



Two sources of ' bank financing ' that are outside of chartered bank commercial loans are the Government Of Canada Small Business Loan program for transactions under 1 Million dollars, as well as the government's crown corporation, committed to entrepreneurs - Business Development Corporation.

These two solutions should be explored but have some specific requirements around how their business purchases are instructed. A recommended strategy for these two solutions is to work with an experienced business advisor to determine if one or both of these two ' government ' solutions will fit your business purchase plan. As a general comment we can say that both of these 2 ways to acquire a firm are very focused on hard assets such as land, buildings, fixed assets, qualifying leasehold improvements, etc.

Highly leveraged deals can also be financed successfully if the underlying assets are strong and you can demonstrate the acquisition will be able to generate cash flow to support the higher leverage in the transaction. Pure cash loans, called ' mezzanine loans ' are very focused on the past, present and future cash flows of the business. It is here where a detailed BUSINESS PLAN and cash flow projection are absolutely required. Because ' mezz ' deals are unsecured by assets it's all about the cash flow!



VALUATION

We're told by ' experts' that the financial markets are ' imperfect ' to some extent, and that's probably the case with valuing and then buying a company. Business valuations always come down to an analysis of profits, and in the valuation process your goal is to attempt to ' normalize earnings' to reflect how the new entity will perform in the future. Business valuators use what are called ' multiples ' of key data points such as profits of sales and they are critical when you considering how to buy a business in Canada.




From a ' valuation ' perspective there are of course several time tested ways to value the target firm. Naturally there are different motives for buying a business that is already doing well. (Or a business that needs to be repaired! which often presents an even greater opportunity, and risk)Those motives might be synergies, economies, faster growth, less competition, etc. Because a lot of valuation strategies are subject to opinion we've often focused more on the ' assets' in the business. Good mgmt can usually reverse any losses, grow the business, etc

Example of Multiple Valuation

If a firm generates 400,000 cash flow each year it is not uncommon in many industries for the business to sell at a 3 or 4 times multiple of that cash flow, thereby providing a potential selling price of $1,600,000.00 as an example of the 4x multiple. That suggested selling price must now constitute a financing package of your cash deposit, senior debt, operating debt, and potential seller financing.


It's the assets in the business that will allow mgmt to increases earning power if the true value of the assets is understood. In many cases a proper appraisal of assets may well be required or simply the right thing to do.



The ' hard ' assets in the business are typically equipment, technology hardware, vehicles. We also mustn’t forget leasehold improvements as a part of any firms potential asset mix.



The ' current assets ' in the business will be providing the takeover with the liquidity and asset turnover it needs to be successful. Understanding the quality and turnover of accounts receivable and inventories are key to successful takeover financing.



Note also that almost always intangible assets and goodwill are normally not financeable in the SME (small to medium enterprise) marketplace. Many firms invest in R&D, and in those cases SR&ED tax credits can be part of the financing plan. All the analysis you do in the context of what we have discussed is knowns as ' going concern ' due diligence, and may often require a final adjustment to an offer price to buy the business. All the valuation and diligence you perform will steer you to how to raise capital to buy a business.



Getting proper financial statements from the target firm is key to any financing takeover success, again keeping in mind all the ' subjectivity' that comes with every item on the balance sheet ( except cash !).

How To Acquire A Company - Acquisition Financing 101

What strategies are used to finance business purchases and mgmt buyouts in Canada? They include:

Bank Loans - When Canadian chartered banks are the senior lender in your transaction they will always require a total charge on all the assets of the company including current assets such as a/r and inventory as well as the fixed assets, including real estate.



Govt Small Business Loans (new limit = $1,000,000.00) - This program is one of two ' government sources ' of capital to purchase a business. Terms are flexible and competitive and the personal guarantee is limited. The government does not lend money directly under the program, which is administered by INDUSTRY CANADA. Instead, it guarantees a large portion of the loan to the bank who lend directly to fund your acquisition. The main requirements of the program are down payment, good credit history and industry experience in the business you are targetting to buy. The ' SBL ' loan is often the best way to complete a small business acquisition .



Asset based loans- Asset based credit lines are a key source of business purchase financing. They monetize the assets of the business into a loan which can be both term and operating in structure. The revolving portion of these facilities provided day to day working capital and are paid down as sales are generated and clients pay. ABL facilities are often key to a successful business purchase financing.


Sale leasebacks - Sale leaseback financing can generate cash on already owned and unencumbered assets

ABL Business Credit lines - these lines of credit are practical to the day to day running of the business and can combine all the assets of the company into one borrowing facility that margins receivables, inventory and equipment, as well as real estate if applicable.

Tax Credit Financing - SR&ED Tax Credits Can Be Monetized To Secure Cash Flow

A/R financing - Receivable financing is a component of asset based lending . The ability to finance business receivables is key to unlocking day to day working capital needs. The day to day cash flow needs of the business can be addressed by numerous forms of invoice financing. Our recommended solution to clients of 7 Park Avenue Financial is Confidential Receivable Financing, allowing you to to bill and collect your own receivables unlike the typical ' factoring ' model of invoice discounting.


Invoice financing is a term for arrangements that allow you to finance your business invoice receivables. It is mostly used by small businesses to improve working capital and cash flow position by meeting short-term liquidity needs. The two most used solutions are invoice discounting and factoring.

Unsecured Cash Flow Loans - Mezzanine financing

Franchise loans - Many franchises in Canada are financed under the Government Small Business ' B I L ' loan as well as a combination of equipment financing and business lines of credit.

DUE DILIGENCE

It's important to properly and quickly identify the documents and information you require to properly assess the purchase price. A typical package will include several years of financial statements and interims if available, corporate tax returns, premises lease, equipment lists, aged payable and receivables, copies of bank statements and details surrounding current secured lenders and their agreements/collateral held / covenants, etc.

The entire due diligence process should be considered with the assistance of your lawyer, accountant, and business financing advisor. Their advice can be invaluable on the overall success of your purchase. In the overall financial diligence, you should consider any cost-cutting or productivity improvements you can make to grow cash flow and profits.



It should be recognized that many business purchases might also involve assuming some of the debt the company has in place, and that new ' operating facilities' such as business credit lines will be often needed when you're considering all your acquisition financing options and structures



In many cases a combo of financing methods may well be required to ensure the right amount of debt and equity and cash flow and working capital needs to be required by the business and

Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in proper business purchase finance.



7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

Stan has had a successful career with some of the world’s largest and most successful corporations. He is an experienced

business financing consultant

.

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 financing 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.


Click here for the business finance track record of 7 Park Avenue Financial







Stan Prokop
7 Park Avenue Financial/Copyright/2020

Business Acquisition Financing

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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

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
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

Business Purchase Finance In Canada: Takeover Financing For Acquisitions That Makes Sense

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Smart Ways To Finance A Business Purchase Or Management Buyout

OVERVIEW – Information on business purchase finance in Canada. Acquisition takeover financing for SME companies in the Canadian marketplace

Business purchase finance in Canada often requires some, shall we say ' deft ' takeover financing strategies when an acquisition is made. This often includes the management buyout scenario. Let's look at some of the acknowledged ' smart ' ways to buy and finance a business purchase. Let's dig in.

There are often great rewards when an existing business is purchased properly with the right underpinning of finance and mgmt skill. We're told by ' experts' that the financial markets are ' imperfect ' to some extent, and that's probably the case with valuing and then buying a company.

From a ' valuation ' perspective there are of course several time tested ways to value the target firm. Naturally there are different motives for buying a business that is already doing well. (Or a business that needs to be repaired! which often presents even greater opportunity, and risk)

Those motives might be synergies, economies, faster growth, less competition, etc. Because a lot of valuation strategies are subject to opinion we've often focused more on the ' assets' in the business. Good mgmt can usually reverse any losses, grow the business, etc

It's the assets in the business that will allow mgmt to increases earning power if the true value of the assets is understood. In many cases a proper appraisal of assets may well be required or simply the right thing to do.

The ' hard ' assets in the business are typically equipment, technology hardware, vehicles. We also mustn’t forget leasehold improvements as a part of any firms potential asset mix.

The ' current assets ' in the business will be providing the takeover with the liquidity and asset turnover it needs to be successful. Understanding the quality and turnover of accounts receivable and inventories is key to successful takeover financing.

Note also that almost always intangible assets and goodwill are normally not financeable in the SME (small to medium enterprise) marketplace. Many firms invest in R&D, and in those cases SR&ED tax credits can be part of the financing plan.

Getting proper financial statements from the target firm is key to any financing takeover success, again keeping in mind all the ' subjectivity' that comes with every item on the balance sheet ( except cash !).

What strategies are used to finance business purchases and mgmt buyouts in Canada? They include:

Govt Small Business Loans (new limit = $1,000,000.00)

Asset based loans

Sale leasebacks

ABL Business Credit lines

Tax Credit Financing

A/R financing

Unsecured Cash Flow Loans

Franchise loans

In many cases a combo of financing methods may well be required to ensure the right amount of debt and equity and cash flow and working capital needs required by the business. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in proper business purchase finance.



Stan Prokop - founder of 7 Park Avenue Financial –

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years - Completed in excess of 100 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 & Contact Details :
http://www.7parkavenuefinancial.com

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 '

ABOUT THE AUTHOR
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

Buying a Company In Canada : Business Purchase Finance Problems Are Solved Like This

Can Buying A Company In Canada Be Easily Done ? Acquisition Financing 101

OVERVIEW – Information on buying a company in Canada. These business purchase finance solutions , tips and tricks will make your acquisition successful

Buying a company in Canada may be an easier process than you might think... if you're aware of certain financing and valuation pitfalls that many purchasors either don't know about, or worse, choose to ignore. Let's dig in.

In many cases it safe to say that that amount borrowed to fund the purchase will often dictate different levels of complexity. Many businesses in Canada that are under the 5 Million dollar range in annual revenue can actually be accomplished with the government ' SBL ' loan.

Here though the loan cap is $ 350,000.00 so that again dictates that in some cases additional financing strategies on top of that loan might be required. In our experience many franchises are well suited to purchase under that 350k cap. And by the way the general terms and conditions of that loan are very competitive and attractive.

If you are borrowing from a bank, a commercial finance company, or even with some level of seller participation ( aka ' the vendor take back ' ) there are some solid ' top up ' financing solutions available . They include equipment financing, cash flow loans - secured and unsecured, working capital term loan debt, asset based credit lines, and even monetization’s of SR&ED research credits if in fact they exist on your transaction.

While many prospective business purchasers focus on taking on debt or monetizing assets of the business in question they often overlook the fact that a significant amount of cash flow

can be generated by better management of company assets. You would be surprised at how improving A/R turnover, turning inventory faster and managing payables better will improve cash flow.

When buying a business study ratios of DSO, Inventory turns, and a/p days outstanding. They will give you a strong sense of where there is room for improvement. Over all this new found cash flow will limit some of the ongoing working capital you need.

Valuing the fixed assets will also maximize financing potential, and this is typically done via the services of a third party appraiser selected by yourself, or more commonly the lender.

No issue in Canadian business financing could generate more discussion with your lender than the dreaded ' Personal Guarantee '.

While every situation will differ it's safe to say these are negotiable to a certain extent if the overall optics of your purchase are positive.

Purchaser and seller may well wish to consider a vendor take back of some sorts. While sellers can often demand a higher purchase price in this area buyers have the comfort of knowing they have secured some additional ' financing ' with someone who is very incented for you to succeed!

The absolute fundamentals of buying a company and arranging business purchase finance include having a solid business plan, good cash flow projections ( conservative is better!) and ensuring that in some manner you as a buyer have some personal equity in the transaction . It's the proverbial ' skin in the game'.

When it comes to that cash flow carefully consider realistic revenue expectations and your ability to collect client receivables in a timely manner. Building in the need for future asset purchases is critical also.

Both buyers and sellers can benefit from the use of an outside advisor when it comes to actual valuation of the business. Tax issues around asset vs. share financing, earn outs, goodwill, etc can be complex.

Would a co-pilot help?

Consider seeking out and speaking to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success
who can assist you in making more complex financing issues easy to understand.. and accessible.





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 PURCHAES 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 Purchase Finance . Avoiding The Crisis Part Of Acquisition Financing At The Starting Point

How Do You Pay And Finance A Business Purchase? Will That Be Cash Or Credit?



OVERVIEW – Information on business purchase finance . What are the best ways to complete successful acquisition financing without making serious mistakes along the way . Avoiding the cash/debt crisis of poorly structured deals




Business purchase finance in Canada. When it comes to acquisition financing for new or existing business the question of financial resources and strategy becomes, very quickly, top of mind. But how in fact do you pay for/ finance such an acquisition in Canada. Let's dig in.

We're of course assuming you have in fact identified your target already, having properly focused on value, price, and giving thought to all the legal , accounting, tax and oh yes, ' people issues' involved in your purpose. Those are important, but today we're focusing on financing that challenge.

Although it's certainly possible to purchase and finance a non incorporated proprietorship or partnership we'll focus today on financing a legal entity... i.e. the corporation.

If we had to sum up the key issues around the whole financing structure it would come down to:

Bank and Commercial financing debt and credit lines

Any financing the vendor is prepared to provide

Owner subordinated debt

The letters in T E A M are very appropriate here as they can also stand for - Together Everyone Achieves More. So it's highly recommended your team consist of your own partners and management, but also good advice from your lawyer, your accountant, your personal or corporate banker, and probably an experienced Canadian business financing advisor.

And it just might be that advisor can introduce you to even better/smarter lawyers, bankers, accountants, etc - After all, that's his or her business. Their advice is worth a million, but of course ultimately it's your call.

A solid place to start in your financing structure work is to simply take the balance sheet and divide all assets and liabilities into the following categories”

Working Capital
Real Assets
Intangible Assets (may or may not have value to your deal)
Creditor Debt - i.e. suppliers
Lender Debt
Owners Investment /Equity

Just simplifying the balance sheet in this matter allows you at a visual glance to determine where money is going to come from, where it's coming from now, and how some of the relationships around that flow of funds changes.

By that last comment we're really focusing on the concept of what lenders call ' ratios'. We have always called them relationships. Quick example: The current business might have, for example 30% of long term debt. Under the final picture that number might change drastically - but if, in the case of long term debt it increases a lot your ability to either properly finance the purchase, or survival might be at risk!

It's safe to say also that those relationships we've talked about above are a little different for larger deals as opposed to buying a business in the franchise or SME sector. Your goal, along with your advisor team, is to sort out a financing package that addresses assets... and... CASH FLOW.

Never assume you will get the financing need based either just on assets, or just on cash flow. If you have a profitable company that’s growing quickly that can certainly help with a lot of the finance challenges. While growth sometimes hides some business weaknesses it usually does appease your lenders and bankers to a certain degree. Financing a slow growth company that has challenges might have made your offer price attractive, but you are certainly at risk when it comes to cash flow, debt, and asset replacement needs.

Can you avoid the ' Crisis' part of any acquisition financing? No guarantees for sure, but solid advice and analysis will eliminate a lot of that risk. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor for the business purchase finance you need.






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 = Business Purchase Financing Expertise



CONTACT:
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