What is typical finance structure for acquisition in Canada without SBA

by a searcher from Memorial University of Newfoundland

Apr 01,2023

Hi All,

Still in early stages here - I'm going to be relocating to Toronto in the next 12 months with my wife and will be kicking off a self-funded search.

I've read most of the standard ETA literature and its obviously US-centric. We will not have access to SBA in Canada and I'm wondering what a -typical- post-transaction cap structure looks like. I have read that a###-###-#### % SBA loan with 5%/5% earn out and equity contribution is common in the US, but I get that would not be the same up here... I'm assuming banks won't provide that much financing.. Is mezzanine debt or preferred equity more common? Do transaction multiples reflect this?

We are not shy about personal guarantees and my partner and I currently earn >$1m household. Just wondering how much personal equity (in % terms) I will need to put up to acquire a business - targeting a range of $750 - $1.2M EBITDA. 

Any guidance would be greatly appreciated!

Thanks,
Mark

3 likes
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5 comments

searcher from Instituto Tecnológico y de Estudios Superiores de Monterrey (ITESM)

Hi Mark, I'm planning on moving to Canada soon and am considering starting a search but am still undecided on where to land. How did you end up choosing Toronto? Was it driven by the size of the city or did something else influence your decision?

04/06/2023 | like reply | 0 likes

searcher from University of Manitoba

One scenario I saw recently was 25% equity (15% down from purchaser + 10% vendor loan) and 75% from BDC (Business Development Bank of Canada) over 7 years. In this case there was a solid history of stable earnings and cash flow. There are lots of other options too, but 5-10% down with an SBA loan just doesn't exist in Canada.

04/02/2023 | like reply | 0 likes

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