Financing in Canada
December 10, 2024
by a searcher from University of Toronto - Joseph L. Rotman School of Management in Toronto, ON, Canada
We hear a lot about the funding landscape in the U.S. (e.g. SBA), but interested to hear about funding an acquisition in Canada. I know there's the BDC, but I've never personally worked with them before. Anyone have any general info / advice?
My specific questions:
- Any way to get a loan done without a personal guarantee? (Slim chance, but asking anyway)
- What loan to value do they typically fund?
- Who are the major sources of loans? BDC... any others?
- Possibly to get equity backers into a deal?
For context, it's in the $1M purchase price range.
Thanks.
from University of British Columbia in Canada
- 25% personal equity
- 10% VTB
- 65% debt
Debt-service ratio should be 1.25
This is what we've used to model the deals we've looked at.
One of the best things you can do is take your deal to as many of the major banks as you can. Reach out to someone in the commercial financing department and ask them who the ideal person is to talk to.
Hope this helps!
from University of Saskatchewan in Calgary, AB, Canada
It is highly dependent on the bank and the financial conditions of the target. Generally from my experience it seems like if BDC is lending it likely needs to take a PG. I have seen it be a limited guarantee however (some % of the loan value). Sometimes BDC seems to require specific language in a VTB note regarding BDC approval for any payment of principal, which can be problematic depending on what the vendor in your transaction is expecting.
As others have mentioned private credit really seems like it is on the rise in this space and often doesn't need a PG. The interest rate tends to be a lot higher, but there can be other flexibility like deferred interest payments that we don't often see with the bank (at least at that loan range). My advice is once you have an LOI signed to shop it around as widely as possible to see what options are out there.
Feel free to shoot me an email happy to discuss further - redacted