How to finance buying an existing business in Canada (UPDATED 2024)

by Raj Arora


Feb 13, 2024

Are you thinking about buying a small business in Canada? It can be a thrilling and rewarding experience. At Grand Commercial Funding Solutions (Grand CFS), we recognize the great potential of this decision for expanding your customer base, increasing your capabilities, or exploring new markets and acquiring an existing business, whether a competitor’s or supplier’s enterprise or an independent opportunity, comes with numerous benefits.

The Benefits of Buying an Existing Business

When you acquire a business with an established presence, you gain access to a pre-existing product or service already positioned in the market. Additionally, you inherit trained staff members and established supplier networks and distribution channels. However, it is essential to conduct thorough due diligence, especially if the business is struggling. This will help you navigate the challenges effectively and revive the business’s fortunes.

Where to Find Your Ideal Business

Businesses for sale in Canada are advertised through different channels, which include commercial real estate agents, brokers, and online platforms. Grand CFS recommends using your personal and business networks to find the proper acquisition, whether an independent company or a franchise.

Securing Financing for Your Business Acquisition

Embarking on the journey to acquire a business requires careful consideration of financing options. At Grand CFS, we specialize in utilizing government business loan programs to facilitate your purchase. Explore the following financing options:

  1. Self-Funding: Quick and efficient, using your funds for the purchase. If self-funding isn’t viable, alternative options are available.
  2. Seller Financing: Some sellers are willing to loan buyers the money for the purchase, indicating confidence in the business or providing incentives. Evaluate the seller’s rationale and negotiate terms.
  3. Bank Loan (CSBFP Program): The Canada Small Business Financing Program (CSBFP) offers loans for small business acquisitions. Grand CFS can guide you through the eligibility criteria and program details.
  4. Leveraged Buyout: Leverage the business’s assets for financing, combining seller financing and a bank loan.
  5. Raise Additional Equity / Mezzanine Financing: A hybrid form of financing that combines debt and equity, backed by the company’s cash flow.

Steps to Take When Buying a Business

  1. Due Diligence:
  2. Request and evaluate essential documentation, including financial statements, tax returns, asset lists, client and supplier details, employee files, and contractual information.
  3. Structure the Deal:
  4. Negotiate the price and terms, making informed decisions on financing options.
  5. Legal Formalities:
  6. Prepare and sign the necessary legal documents to formalize the acquisition.

Critical Considerations in Buying a Business

  1. Assumption of Debt:
  2. Decide whether you acquire assets or the entire business, including liabilities and debt.
  3. Financing Operations Post-Purchase:
  4. Plan for the funds required to operate the business after purchase, exploring options like cash reserves, lines of credit, and invoice financing.

Grand CFS – Your Partner in Small Business Success

Navigating the intricacies of acquiring a small business requires expertise, and at Grand CFS, we’re dedicated to unlocking government business loan programs to facilitate your journey. Contact us to explore the possibilities and secure the optimal financing structure for your business acquisition. Your success story awaits!

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