Wednesday, 20th April 2022 | Small business financing Canada,Management
Can I get a business loan to buy a business?
You can qualify for a business loan to purchase a business that could help you with expansion and add more profit to your existing business by building additional revenue streams. Read all about how you can get clearance for a business loan to acquire or buy a business.
Why purchasing a small business in Canada could be beneficial
Purchasing a business in Canada might be a cost-effective strategy to grow your customer base, expand your capacity, or enter new markets. You may even buy a competitor's or supplier's company.
Purchasing an existing firm has several advantages
There are many advantages to buying a business or an established firm. For example, the product or service that the company provides is already well-positioned in the market, the personnel is well-trained, and the supplier network and distribution channels are well-established.
However, if you are purchasing a failing firm, you must first obtain a thorough grasp of the reasons for the failure and then carefully examine if you have what it takes to turn things around.
The maximum amount of money you may borrow to acquire a business
The amount of money a lender is willing to provide for a business acquisition loan varies significantly from one company to the next. The value of the assets you're using as collateral, your cash flow, your credit score, and your firm's financial health are all factors that influence loan amounts. Depending on these characteristics, lenders may provide as little as $250,000 or as much as $35 million.
The lengths of company purchase loans in Canada vary, although they commonly range from three to 10 years.
Financial options when buying a business
There are various methods for getting a loan to buy a business in Canada, so you need to weigh all of your options before deciding on the best financing arrangement.
Self-funding
It is the shortest method since you fund the transaction with your own money. However, in many circumstances, this cash isn't available or isn't available in significant amounts, so you'll need to look into alternative financing possibilities. Read on for a list of options.
Financing from the seller
Some business owners selling their companies are prepared to lend money to potential purchasers. When this occurs, it typically indicates that the seller believes in the business or the buyer's ability to operate the firm successfully after purchase. However, it might also suggest a restricted market for the firm being sold, and the seller is attempting to entice possible purchasers. As a result, you should think about the reasoning behind the seller's decision to finance, as it may affect your negotiating position.
In most cases, seller financing does not cover the entire purchase price. Therefore, you will need to make a down payment as a buyer. However, you can cover the down payment with a secondary funding source, such as one of the other choices indicated in our article. There are no particular qualifications for seller financing because each seller will have their own set of requirements. Some will want to see a decent credit score, although you do not have to be a top borrower.
Getting a bank loan
Banks are typically hesitant to provide money for business purchases. However, you may want to consider this option which allows you to get a small business loan in Canada for various purposes, including acquiring an existing firm. You might also want to look into the Business Development Bank of Canada, which has several long-term funding alternatives based on your circumstances. Financing options specifically designed for the purchase of a business include vendor take-back financing; unsecured loans for intangible assets such as intellectual property, goodwill, and client lists; long-term loans based on the value of fixed assets such as land, buildings, equipment, or shares in an existing business.
Buyout with leverage
The firm's assets you're buying (equipment, property, or inventory) are used to fund the acquisition in this financing arrangement. A mix of seller finance and a bank loan is used in most leveraged buyouts. It is highly typical, as business purchases frequently include various financial sources.
Online Lenders
iCapital is one of the most trusted online lenders in Canada offering loans to businesses. You can qualify for up to $250,000 with iCapital in as little as 48 hours. Our application process is fairly straightforward and loan approval is as high as 98%. Connect with us to discuss your financial plans and needs and we will work out the best strategy for you.
Things to consider when buying a business
- Debt assumption: When purchasing a firm, you must decide whether you want to acquire the assets or the entire company, including assets and liabilities (debt).
- Purchase financing: When buying a firm, keep in mind the finances you'll need to manage once you've bought it. After making your purchase, you'll have several financing choices for getting a business loan.
- Self-funding and cash reserve: In an ideal world, a company's activities would be financed by its cash reserves once it is purchased. However, you may need to bring in more money if they aren't adequate.
- Line of credit: When your company has a business line of credit, you may borrow up to a particular amount and pay interest on the amount you borrowed. A line of credit is helpful since it provides your firm with rapid access to cash, up to a pre-determined credit limit, similar to business credit cards.
- Financing for invoices: Invoice financing refers to financial agreements that enable you to finance your company's invoice receivables. Small firms utilize it to boost their working capital and cash flow by fulfilling short-term liquidity demands. Invoice discounting and factoring are the two most popular options.
Why iCapital?
A loan can be used to purchase a firm from an existing owner in Canada. You can use various financing options to finance the purchase. You should evaluate which funding option will work best for you and then decide whether you should invest in the purchase.
Are you interested in learning more about this? Contact iCapital at 1.877.251.7171 to get a loan to buy a business using our straightforward procedures.
Read Also
Marketing ideas for your business in the new year
As the end of the year approaches, it’s time to revisit your marketing strategy to meet current consumer expectations. Forecasting trends is tricky, but what’s clear is that in 2023, customers value privacy, inclusivity, transparency, and overall authenticity, and it’s your job to show them how your business practices meet these ideals. Read on for six steps you take right now to market your business in 2023.
Understand your changing audience
The first thing you need to do is revisit your market. Review your sales and marketing data to make sure you have a realistic grasp on the size, demographics, and character of your target market. Pay close attention to any changes in your ideal customer and use this updated intel to seek out new opportunities. For example, if your business has grown or taken a new direction in recent years, it might be attracting a new audience. Make sure you’re communicating with the most appropriate market segment.
Update your website
Your website is one of your most valuable marketing assets so it’s crucial that it be in good shape. Review your site to make sure all the content is correct and up-to-date. Check to make sure that it loads quickly and displays correctly across desktop, tablet, and mobile platforms. You probably look at your site regularly so consider getting someone with “fresh eyes” to take a look. Ensure that your site works intuitively and offers a seamless customer experience. A site that’s pleasant to use will help you convert new visitors and retain returning ones.
Maximize the potential of social media
With more than 4.7 billion people using social media, your business cannot afford to ignore it. If you’re just starting out on social platforms, now is the time to claim your presence. Set up accounts for your business on top platforms like Instagram, Facebook, and TikTok. Investigate which sites your ideal customers might be using and ensure you’re on them too. Post relevant content, regularly, and make sure that you keep your profiles fresh and current. Try running contests or promotions to boost engagement, and take advantage of the built-in shopping capabilities available on many platforms. You can communicate a lot about your brand values by aligning yourself with other local small businesses through collaborations or sponsorships.
Leverage video content and live streaming
Video content has been a rising trend for the past several years, and is well-suited to businesses who want to increase awareness, improve lead generation and sales, and reduce support calls. Consider how video content might work for your business, keeping in mind that consumers appreciate being entertained. Live streaming is popular and an effective way to connect with your audience in real time. Engage your audience with quality storytelling. Inform them with a clear and concise script. Be creative.
Get interactive with your audience
When was the last time you did an online quiz or game? How about worked with an online calculator or map? Interactive content is engaging, which is why audiences–and marketers–love it. It’s low-cost and can help you increase brand loyalty, generate leads, and drive sales. Think about ways your business can use interactive content to grab your customers’ attention.
Respect consumer privacy
More than ever, consumers are concerned about privacy. Demonstrate respect for your customers’ privacy by compliance with standards like GDPR, by properly acquiring and using user data, and by continually informing your customers of exactly how you’re handling their information.
If you want to stay ahead of your competitors in 2023, now is the time to fine-tune your marketing efforts to communicate your business’ authentic brand and values. Take an inclusive, transparent, privacy-first approach, to reach your target audience.
Marketing