David C Barnett Small Business and Deal Making M&A SMB Non - SBA Acquisition Financing
Sep 25, 2024
Discover how to navigate non-SBA acquisition financing, perfect for Canadians and Americans alike. Explore key financing options available in Canada, including the Canada Small Business Finance Act. Dive into the essentials of business acquisition, focusing on capital relationships and funding strategies. Learn about the intricate capital stacks involved in deals and what banks look for in tangible assets. Gain insights into traditional financing advantages, emphasizing the importance of loan repayments. Plus, engage with fresh financial solutions and training options!
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Canada's Small Business Loan Basics
- Canadians can use the Canada Small Business Finance Act loan program for business acquisition financing.
- Expect personal guarantees and collateral liens as part of the loan approval process.
Business Acquisition Capital Structure
- Business assets fall into fixed assets, operating capital, and goodwill, which represent the business's tangible and intangible value.
- Financing match these categories: loans for fixed assets, revolving credit for operating capital, and seller financing for goodwill.
Equity Requirements for Financing
- Banks usually expect entrepreneurs to put in about 25% equity for business acquisitions.
- This three to one debt-to-equity ratio provides a threshold of acceptable risk for lenders.