The Purchase Of a Distressed Business In Canada. Eliminating The Worst Days Of The Acquisition Of A Troubled Company

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Everything You Didn’t Notice When You Purchased A Distressed Business

OVERVIEW – Information on buying a distressed business in Canada. The acquisition and purchase of a troubled company is a daunting business challenge





Buying A distressed business in Canada. It's a phone call we've received a few times over the years - a clients earnest desire for the acquisition / purchase of a troubled company that... guess what... comes at a great deal and price!

Hindsight will often tell the business owner certain things weren't noticed in that whole process, creating some tremendous challenges for the new owner/manager. Let's dig in.

Opportunities in distressed business turnaround and acquisition come out of several areas. One is simply that in some ways we are still not over the economic crisis of 2008 and many businesses, small and larger are still affected in certain ways - bottom line, they are distressed. In other cases companies have in some cases ‘ lost their way ‘.

That presents a tremendous opportunity for a savvy buyer. In some cases it might be a direct purchase; in others it might mean a merger scenario.

The benefits of a successful acquisition of a troubled company are obvious - they often include a solid return on investment and assets, the ability to enter new markets, and also to acquire assets at what some might deem a fire sale price.

In many cases the business purchaser has the ability to remove the debt burden of the original target firm - either through legal or informal means- i.e. negotiation with creditors, suppliers, etc.

So where are some of the areas where things can go really wrong in buying that distressed business? Part of the problem can simply be the purchaser loses focus of the original intent of the acquisition as things get tangled up in negotiations, business cultures, etc.

In all cases it's important to determine there is no legal ' hangovers' in the target business , issues such as existing liens, contracts that were in place, lender agreements, lawsuits, etc.

When it comes to the assets of the business in question it in fact might be very prudent to allow certain assets, inventories, etc to remain with the current owner. But don't forget that those supplier /vendor relationships that were in place are critical to the ongoing success of any company.

Don't forget also that the ability to keep key personnel in the target firm is a valuable consideration, however that presents a big challenge when the business was in fact under duress and may have lost confidence in the business.

In Canada you can of course legally buy a business that’s already in receivership or bankruptcy or CCAA proceedings, however this has sometimes a larger cost and other legal obligations.

The right type of financing is available for all types of distressed business acquisitions. Financing and acquiring a troubled company can be achieved with bank term loans, asset based lending, mezzanine financing, etc.

If you're looking to eliminate the ' bad times' in the acquisition of a troubled company seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with ' noticing' the areas that will make or break success.



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 :

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





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

Phone = 905 829 2653


Email = sprokop@7parkavenuefinancial.com

Stan Prokop

Buying A Business ? Survival Tips In Canada For Financing Your Business Purchase

Take Error And Controversy Out Of Business Acquisition Financing

OVERVIEW – Information on financing a purchase when buying a business in Canada . Key issues in financial success in a merger/acquisition



Buying a business in Canada is the alternative to growing your existing company ' organically ‘, or starting a business from scratch. But how does the business owner/ entrepreneur avoid some of the mistakes and controversy than can arise out of the purchase in business acquisition financing? Let's dig in.

The attraction to buying a company has probably never been greater - whether it's finding a company that is (supposedly?) a great bargain or simply fulfilling the dream of entrepreneurial independence it’s all about potential success, and profits.

Financing the purchase of a business is the place where the error, challenge and controversy we have hinted at must be avoided. The reality is that not every bank or commercial finance entity (we’re speaking of debt financing or asset monetization, not ' EQUITY ‘) can always meet all the finance needs you require to complete a purchase successfully. And that’s talking about capital to acquire, as well as ' working capital/cash flow' to operate and grow.

So what are the sources for business acquisition loans? In Canada they might include Canadian chartered banks, commercial credit unions, and commercial finance companies via ASSET BASED LENDERS, equipment lessors, and the government of Canada via a SBL /CSBF loan or a working capital term loan via its Crown corporation lending entity.

A very solid route for the SME sector when it comes to acquisition finance is the above mentioned SBL loan. If the business you're acquiring has less than 5 Million in revenues and has real assets it’s a great way to buy a business.

While our focus is on loans and asset monetization for your business purchase don't also forget that there has to be some sort of buy equity , in effect your ' down payment ' for the purchase . While 100% financing might be possible in very unique circumstances never forget that banks and other lenders will want to see some of your personal funds into the transaction. That varies from anywhere between 10-50% depending on the quality and structure of the transaction.

Equity capital is also risk capital and the purchaser should understand that; i.e. mortgaging the home might not be the optimal strategy! Suffice to say though that the amount you contribute to the transaction clearly is a strong measure of your commitment to the venture, and lenders respect that.

Vendor take backs, aka ' Seller financing' can be a solid way to make a transaction happen. It allows you to put a final piece of the puzzle in place one you have lined up your other capital. The seller may wish to help you out in that manner not out of the goodness of their heart, but to realize some tax benefits as well as allow a purchase to happen that otherwise may not have. Naturally large per centage seller financing is optimal... for you... but not the seller!

When you are looking at a vendor take back in structuring a deal remember that there has to be some finance terms around the VTB. Quite often we see interest rates payable by the purchaser, on the VTB portion at or near current bank type rates.

Critical to understand is your ability to convince your lender that the Seller financing part of the deal not be considered debt. That could throw certain ratios and covenants out of the whack which may not allow your lender or lenders to complete a deal.

Remember also 'share ' sales are not really financeable in the SME sector, so a total focus must be around an ' asset' based purchase, even if some of those assets are intangible! By the way, that goes for existing franchises also in the booming Canadian franchise industry.

Putting the right financing in place when you're buying and financing a business in Canada is a key element of your future success. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with purchase financing that makes sense for your individual deal.



Stan Prokop - founder of 7 Park Avenue Financial

http://www.7parkavenuefinancial.com

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

Phone = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

Stan Prokop

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

Buying And Financing A Business Purchase With An SBL Government Loan In Canada

Let Your Business Purchase Put You On The Road To Richistan !


OVERVIEW – Information on the buying and financing of a business purchase in Canada using a SBL government loan strategy. A Hands On How To!




At some point in time many business people have the opportunity to purchase a business in Canada. That’s buying a business, not starting one by the way!

But financing the business purchase, i.e. putting your transaction together is another story. Here's one great way to do it if you business fits some basic criteria, and it’s via the SBL government loan. Finally, some help from Ottawa, but we digress...


There are of course the obvious advantages to buying versus building a business. First of all it's easier to find if you know what you are looking for, and many of the challenges of starting a business are immediately eliminated when you have a turnkey operation already in place. Finding premises, buying and financing assets, and generating revenues with a sales / operating team are instantly removed. Not that we're making anything too easy.

Oh and buy the way when we think in turnkey, we often think franchises, and to make it perfectly clear our strategy today also covers existing franchises, or corporate stores owned by the franchisor .

Getting a clear look and quick access to the business financials, but no matter how good, or bad... those financials look it’s a case of also trying to understand the motivation of the seller. Things like a financial tool called the VTB... the vendor take back can often play a key role in our financing strategy today and the proverbial ' motivated seller ‘ is often ok with a vendor take back . (If not, he or she is probably willing to negotiate price a bit more?!)

When you utilize the government SBL business loan for a business financing strategy in Canada you need access to those financials. They will tell us what assets are in the business, and by the way, it’s difficult, if not impossible to finance a smaller concern when there is a huge ' goodwill ' component in the final purchase price.

Although the income statement is important in our financing strategy via the SBL loan it’s not the deal breaker. However clearly you do want to know that the business is generating sales, that’s growing sales, and profits. If not the business can still be financed, don't despair, but you better have an action plan in place for that missing sales and profit strategy!

Getting back to the balance sheet, that’s key today in our finance strategy of buying a business in Canada. Here's where the SBL government loan comes into place. That’s because it finances the current and fixed assets of the business, as well as existing leaseholds. Leaseholds?

Yes, the government loan financing via the BIL/CSBF program finances those three asset categories - fixed assets, receivables as a portion of the current assets, and leaseholds. A qualified appraisal of these is required and the SBL program finances a total of $350,000.00 of these assets. A down payment or equity injection by yourself, as well as perhaps our previously mentioned vendor take back can get you often pretty close to a 1/2 Million dollar financing for your business purchase.

So, is that a creative strategy? We think its closer to a common sense strategy, and one that comes with great rates, terms, and structures, including limited personal guarantees and flexible repayment options that include repayment without penalty.

Buying and financing that business purchase via the SBL loan is a solid way to become a Canadian entrepreneur. Speak to a trusted, credible and experienced Canadian business financing advisor to kick start your business purchase.

7 PARK AVENUE FINANCIAL
CANADIAN BUSINESS PURCHASE 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/buying_business_financing_purchase_government_loan.html

Buying A Business In Canada ? Types Of Financing For Your Purchase

Financing The Purchase Of A Business In Canada


Information on buying a business in Canada . Financing your purchase is available through various techniques and strategies




Buying a business in Canada. It's done for a lot of reasons. Financing that purchase requires knowledge of strategies that allow you to acquire opportunities such as a sale of a family business, seizing the opportunity to acquire a troubled competitor for synergistic reasons, or... heaven forbid... simply growing your business from a size and profit viewpoint.

We'll leave it up to you to identify the business opportunity, however we think it’s our job to ensure you've got some solid access to financing strategies that will work for your success in a business acquisition.

One often overlooked strategy that you should focus on right from the beginning, if only because it minimizes your financing requirement is the vendor take back, often also termed ' owner financing '. Simply speaking, it’s a powerful strategy. And when financing a business purchase becomes a challenge the vendor take back/owner finance strategy makes access to the other types of financing you require... easier!

Typically the Canadian business owner and financial manager thinks of ' the bank ' when they look to acquire a business. That's just logical. However if you're not familiar with the way a bank looks at a business acquisition you're going to hit a roadblock pretty quickly.

Very early on in the process you absolutely have to identify whether you and the selling firm are going to focus on an asset sale versus a stock sale . For small and medium sized businesses in Canada the concept of financing a share sale is somewhat impossible, certainly if financing is required and is a key component of the deal.

If you're a large corporation or public company that’s another kettle of fish, but we're simply saying for a small to medium sized transaction asset sale financing is really the way to go. As an acquirer you'll find that sellers of a business in Canada that wish to focus on a stock sale are really more focused on tax minimization issues, and that isn't going to help you complete the deal.

Once you have focused on the asset sale it becomes a case of determining the value of those assets. This is typically done by appraisal and financial analysis techniques.

Goodwill is the excess dollar amount you're paying on top of the assets. Goodwill is typically difficult to finance, which is why our owner financing/vendor take back strategy is sometimes a good place to start. The sellers financing, often referred to as ' holding the note ‘can allow you to complete a purchase satisfactory to all parties.

Both banks and non bank commercial finance lenders view the VTB (vendor take back) very positively. Since the seller of the business has a vested interest in making the purchase also successful you often can get very favorable, in fact below market financing rates from the owner or owners of the company being acquired.

Owner financing can also be a part of the BIL/CSBF strategy, which is the government loan program used by many SME owners to acquire a business.

A typical structure for financing a purchase when you’re buying a business in Canada is the down payment, debt financing, and the vendor take back/owner financing. When all three align properly you have the makings of a successful result in buying a business in Canada. Speak to a trusted, credible and experienced Canadian business financing advisor for assistance in structuring the best deal and financing for your business purchase.

7 Park Avenue Financial - Canadian Business Acquisition Financing


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/buying_business_canada_financing_purchase.html

Interested In Business Acquisition Buyout Financing For A Canadian Purchase ?

Talk about a capital expenditure. We're discussing Canadian business acquisition buyout financing in Canada and purchase loans available for funding this type of transaction – primarily for the small to medium enterprise in Canada .

Naturally as a Canadian business owner or financial manager it’s critical that any acquisition and its financing challenges be handled in a manner which properly positions your firm for future success and profits. The simple reality is that typically transactions of this nature involve significant amounts of capital relative to the size of your current firm.

Naturally its all about cash - the simple financial model is of course your firms ability to ensure future cash flows receive exceed the purchase price. In reality the only way in which you should consider paying a significant premium is when there is a strong case for putting the two firms together for significant improvement in both.

Another consideration that business owners must also make prior to contemplating purchase loans is the issue of ' diversification ' and the dangers of taking your firm into an unrelated business . Diversification for its own sake clearly might not be an optimal strategy.

So just when is a business acquisition related to your industry, and when is it not? The experts are quite clear on that - if you have markets and clients that are similar, or utilize a technology or science that is also similar then clearly you're acquiring or buying into a related industry. When Canadian business owners and financial managers buy into a similar industry they clearly have a better idea of cash flows and the basic business model - that's a good thing.

In a perfect world you wish to acquire or retain a strong management team when contemplating an acquisition. This certainly makes business acquisition buyout financing less difficult. At the end of the day we can probably all agree with the fact that your skills as the acquirer are potentially more critical than those of the business you are acquiring. It's your challenge of course to make the synergies, profits and sales stay positive.

Do you really need an investment or merchant banker or professional deal maker to complete successful proper purchase loans in small and medium sized business acquisition? We'll go against the grain and say not always - we think that with the assistance of an advisor you're in a position to identify a financing objective and execute on a purchase loan and financing alternative that makes sense for all parties.

So, contemplating an acquisition in the small to medium sized marketplace in Canada? Want some assistance on pricing, areas of risk, and the best way to finance the acquisition. Speak to a trusted credible and experienced Canadian business financing advisor who will assist you with your objectives.




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 .Info re: Canadian business financing & contact details :
http://www.7

parkavenuefinancial.com/business_acquisition_buyout_financing_purchase.html

Revealed ! How Funding Of A Franchise Purchase Works In Canada – Franchise Financing Lenders & Your Loan

We're never ones to be negative, so all we can say is that you can look at it as a problem, or an opportunity. We're talking about how franchise financing lenders work in Canada. Unless we're missing something, you've just made the decision to purchase a franchise in Canada - so how exactly does the approval and funding of that loan work? We're going to clarify that for you, right about now..!

The positive aspect of our information is simply the fact that franchising is ' hot ' again. Of course it’s always been around, and the actual stats on how much of the industry plays an important part in the overall economy is surprising to most. But when world fell to its knees, financially speaking, in the 2008-2009 global recession (and boy did that include Canada) many industries felt the pain, as did franchises. Well, the good news is that's over.

Clients always seem a bit overwhelmed with all the different aspects of putting together their total plan for their new franchise business. That includes choosing the business that matches your skills and investment, picking a location, finding employees, etc. But the biggest challenge seems to be the financing of that purchase via a franchise loan.

So is traditional bank financing available for a pure franchise loan. We're not 100% sure we can give you a ' yes ' on that one, but don’t despair as you will soon see. We suppose if you have pristine credit, a high net worth, strong outside collateral and guarantors, etc you could facilitate a term loan to purchase your business. That unfortunately is not he profile of many of the clients we meet that are looking for loan funding.

So what are those options then? In reality the specialty finance firms that focus on providing only franchise finance are a very small number in Canada. There are more of them in the U.S., but that’s not our turf! The specialty firms that provide the financing for the industry in Canada focus on the large well know brands that have lots of franchise units, strong franchisor financials, etc. That is only of course a small percentage of the total industry.

So whats the solution then if you're in the other majority, the hundreds or thousands of entrepreneurs who still require some major financing assistance. The answer is the Canadian BIL/CSBF program. It’s a customized federal program for businesses in Canada, with a loan funding cap of $350,000.00.

This program allows a Canadian bank to be your new franchise funding partner - mostly because the loan is guaranteed by the government so there is only nominal risk to the bank. Would the bank lend you those funds outside the program? As we said, maybe... but we're sketpical.

So if you are a new entrepreneur with a reasonable record of business success and experience how exactly do you proceed to qualify for your franchise loan purchase financing?

We going to break that down into a few key areas - they are focusing on the size of your investment, determining your own equity or deposit into the transaction, and then focusing on key fundamentals required for a loan approval.

Key elements to focus on are ensuring you can prove you have a reasonable credit history. Prepare a business plan, or have a plan prepared for you , that focuses on you, the franchisor, the financial potential of your business , one that demonstrates you're ready to run a business, and , oh yes, repay that loan .

Typical investments by yourself in the new business range from 25-40%... and as far as that credit rating goes you should have a credit bureau score of 650+.

Is there one secret to getting a final approval? We think it’s a bit more complicated than that, but not as troubling as you might think. Focus on a business plan, presenting yourself properly during the proposal process. We point out to clients that every new business, small and large actually goes through these same processes.

We recently came across a statement that maintains the four ' P’’s of franchise success are people, purpose, payment and protection. In summary, a good business candidate, a good franchise pick, ability to show you will be successful, and a back up plan if things don’t work out - example: spouses outside income.

So can we summarize? Franchising is popular again today... the best franchise financing lenders are specialized firms as well as the ever popular BIL/CSBF loan. Be prepared, and if you need assistance, consider seeking a trusted, credible and experienced Canadian business financing advisor who can fast track you to loan funding success for your new business.




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 .Info re: Canadian business financing & contact details :

http://www.parkavenuefinancial.com/franchise_financing_lenders_funding_loan_purchase.html