Business acquisitions in Canada fail on timing more often than on price. A vendor accepts an offer, the purchase agreement sets a closing date, and the buyer’s bank discovers it needs six more weeks for credit committee, a quality of earnings review and legal. The vendor has another offer. The deal is gone.
The two-step structure
Experienced buyers separate closing from permanent financing. A private lender funds the acquisition on the vendor’s timeline against the assets of the target and, where appropriate, the buyer’s existing company. The bank then refinances the private loan once the acquisition is closed and the combined statements are available. The bridge usually runs six to eighteen months.
What a private lender needs to close
- The purchase agreement and the closing date
- Target financial statements and a current balance sheet
- An asset list: equipment, receivables, inventory, real estate
- Security over the target and a general security agreement from the purchaser
- A letter or term sheet from the bank that will provide the take-out, if available
Vendor take-backs and earn-outs
Many Canadian deals include a vendor take-back, where the seller finances part of the price. A private lender will usually require the vendor to postpone that debt behind the senior loan. Earn-outs tied to future performance are fine as long as they are subordinated and clearly documented. Agree these points before the lawyers start, because they are where closings slip.
Have a situation like this? Tell us about the deal and a principal will respond within two business days. Cascade lends to businesses only, in Canadian dollars, and every rate we quote is an annual rate.
