YOU ARE BUYING A BUSINESS & LOOKING FOR FINANCING!
GUIDE TO BUSINESS ACQUISITION LOANS
You've arrived at the right address! Welcome to 7 Park Avenue Financial - Canadian Business Financing With The Intelligent Use Of Experience
Financing & Cash flow are the biggest issues facing business 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
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Direct Line = 416 319 5769
FUNDING BUSINESS ACQUISITIONS IN CANADA
Buying an existing business in Canada? Considering a management buyout/ leveraged buyout or partner buyout. If you're thinking about entrepreneurship purchasing an established business comes with its own set of considerations when seeking business acquisition financing. Small businesses need help, and they rarely have access or can qualify for private equity firm finance.
Buying an established existing business comes with its pros and cons, and rarely will a person or firm have enough cash on hand to avoid debt and cash flow financing needs. Safe to say that your personal goals should align closely to what this purchased firm offers and the goal is not to disrupt operations too much when taking over ownership/ management responsibilities going forward
QUALIFICATION AND ELIGIBILITY TO BUY SMALL BUSINESSES IN CANADA
Getting a loan for buying an established business is often perceived as easier than starting your own company, but there are still some things you should know.
In order to get the funding necessary in either case, you need to be able to demonstrate that the required financing and investment will pay off for the buyer and the bank or commercial lender -
When you're ready to buy your first business, it can be difficult knowing what type of financing is right for the situation. The ability to focus on the history of the company and its profit and loss situation is key- ensuring that cash flows will service the business acquisition loan should be top of mind.
Different industries operate in different manners -in some cases, commercial lenders may have certain restrictions on the types of companies that are financeable.
It is important to have experience in the industry of a business you want to purchase because lenders will look at your past business experience and history and you, therefore, need to demonstrate some level of business expertise. Personal finance and personal assets should be in order also.
WHAT AMOUNT OF DOWN PAYMENT OR OWNER EQUITY IS REQUIRED
The ability to demonstrate your personal finance is in order is key - Depending on the size and type of transaction you are considering a down payment or owner equity payment of 10-30 % is typically required. The purchase price regarding acquisition loans must consider some sort of owner equity financing component.
LET 7 PARK AVENUE FINANCIAL WORK WITH YOU ON YOUR LOAN PACKAGE FOR THE OPTIMAL FINANCING STRUCTURE
When applying for a business acquisition loan, it’s essential to put together an application packet of all the documents that commercial lenders and banks will ask for. This will help streamline the process and help guarantee success.
From a buyer's perspective business purchases should be prepared to present personal net worth statements, tax returns, and other details of personal finances that might be required. You should be able to demonstrate if required, a good credit score.
WHAT DOCUMENTATION IS REQUIRED FROM THE TARGET COMPANY?
When buying a business, one of your first steps will be to gather documents from the current owner. These documents often contain sensitive information like financials and contracts that may need signing with other companies or people in order for you to take over their company
Key documents you should focus on obtaining include:
Financial statements including cash flow and profit and loss, balance sheets, tax returns, and several months of company bank statements -Other key information includes client lists, agings of accounts receivable and accounts payable, and a complete list of the company's assets and potential intangible assets and specific assets such as real estate or rolling stock.
Understanding what type of business line of credit might be required for ongoing day-to-day funding needs for working capital is important. Lines of credit are critical to offsetting the cash flows required in business credit to finance the acquisition.
THE 7 PARK AVENUE FINANCIAL FOCUS
Our team will prepare a business plan and cash flow projections to ensure that acquisition financing debt can be repaid -Business plans from 7 Park Avenue Financial meet and exceed the requirements of banks and other commercial lenders -that includes our work in normalizing the financials and ensuring valuation of the business is in line with the financing required. Due diligence is key in any business purchase.
WHAT TYPE OF BUSINESS ACQUISITION LOAN IS REQUIRED
Once you’ve run the numbers and are confident in getting a loan for your business, it's time to choose which financing product is right. There are many different banks, credit unions, government institutions, and commercial and alternative lenders that offer loans with varying qualifications - some require more information than others!
Asset-based lenders typically require less stringent criteria than traditional banks do so this may suit people seeking quicker funding solutions
BUSINESS ACQUISITION TERM LOANS
The traditional business term loan is a type of financing offered to successfully complete a business purchase ownership transfer. These loans typically come with favorable terms, including competitive interest rates but more stringent qualification requirements to qualification success
Traditionally, banks have been the only option for small-business owners looking to get a loan. But w more and more people are turning toward alternative lending options with terms that meet buyer needs without restrictive financial covenants.
A traditional bank loan is a good option for businesses looking to purchase property, equipment, or other assets. but they do require that you have substantial asset values as collateral behind your request, or cash flows that can be proven.
The drawback? The process can take time because it's difficult -to get approval without delay before getting any response whatsoever back from these institutions about whether you can be approved.
GOVERNMENT LOANS TO BUY A BUSINESS IN CANADA
If you're looking for a small business loan, the Government Of Canada Small Business Financing Program provides guarantees in case of default to Canadian banks - Industry Canada guarantees these loans in case of default and they make them more attractive to offer because it means less risk on behalf of lender, typically traditional Canadian financial institutions such as banks and certain credit unions - the interest rate on government loans is very competitive.
Costs covered include real estate (for buying property), land purchase; financing equipment purchases, and leasehold improvements. Talk to the 7 Park Avenue Financial team if government small business loans or other options make sense for your transaction and what certain conditions come with the program.
THE SELLER FINANCING STRATEGY
The burden of buying a business can be substantial on the journey to obtain the financing you require. If the seller agrees and is willing- some people find that they get better terms and partial financing through them as opposed to banks or other lending institutions - A seller finance strategy can often be the key last piece of the puzzle in your financing package and can help minimize personal loans in an acquisition deal and encourage better lender financing while minimizing the need to pay interest on new loans in a creative efficient way.
CONCLUSION -TALK TO THE EXPERTS
Talk to your business accountant and lawyer before you start talking to the owner of your potential new company will ensure that everything goes smoothly from beginning through the end. A professional can guide you with solid advice. Speak to 7 Park Avenue Financial for your financing needs, we're a trusted, credible, and experienced Canadian business financing advisor in the area of successful acquisition finance in the Candian SME sector.
FAQ: FREQUENTLY ASKED QUESTIONS /MORE INFORMATION
What is normalizing financial statements?
Normalization adjustments are necessary to remove items from the subject company's financial statements that do not serve as a reflection on its business operations.
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