Looking For A ‘ GO’ For business acquisition finance needs ?
OVERVIEW – Information on acquisition loans in Canada . Financing an existing business purchase comes with significant do’s and don’ts for ultimate success
Business Acquisition loans , and financing for that existing business can come with spectacular success, or spectacular failure.
Whether you are looking at purchasing General Motors ( temporarily not a good strategy!) or a pizza franchise its all about proper financing and planning with the info you need to help guarantee success. Let's dig in.
After the business owner/entrepreneur has made his or her ' valuation' decisions on a business its pretty well all about the financing. The amount you will need to borrow, as well as the equity in the existing business combined with your own new personal investment will make the financial structure of the business.
At this point a couple of key issues immediately need to be considered:
The amount of debt the business can take on
The cash flow that is required to manage and repay that debt - allowing the business to thrive during normal operations and growth stages
As we have said in the past, the normal ' go to' for most business people for acquisition loans is our Canadian chartered banks - so knowing how and if they will support financing an existing business purchase is key. For the banks we can pretty well say it's always about cash flow. An examination of the income statement and balance sheet is key here, as they will reveal the cash flow coverage the bank is looking for. Business owners and their advisors need to ensure that this ' ratio' aligns with bank policies.
As a business purchaser you can run these numbers yourself, or with your accountant and advisor. Ensure that you have some wiggle room as banks, (as well as other lenders) typically use 1:25 as the magic number.
1.25? It's simply the number that shows that cash flow can cover the current year’s obligations for debt by at least 1.25 times.
Preparing a business plan and cash flow forecast that is ' real ' will also help guarantee success. Here you have got to be a bit of a magician as perfection revolves around ' selling' how cash flow historically, as well as current cash flow, and oh yes, future cash flow all align to make the numbers work
. For non financial types it's pretty well now the right time to get some analytical help from your Canadian business financing advisor or accountant. It's highly recommended to assess the amount of debt you are taking on very carefully, well in advance of talking to your financing options.
Banks or other commercial lenders will also focus one the key business issues - be prepared to discuss and assess these:
Future financing that will needed
Timing
Industry and operational risks
Seasonality and how it will impact financing needs
Management depth and experience
The success of any business, as it relates to financing is ensuring you have the right amount of equity and debt. That magical mix will allow you to attract, and secure the financing you need for acquisition loans.
To help guarantee survival and ensure you have assessed those financing options properly seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your business acquisition 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 Acquisition Financing Expertise
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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
