Can BDC finance buying a business?

Yes. BDC, which calls itself Canada’s bank for entrepreneurs, lends directly to people buying an existing business. It is a separate route from the Canada Small Business Financing Program, where financial institutions make the loans and the federal government shares the risk with them. Knowing what BDC will and will not look at helps you decide where to start.

What the purchase loan covers

BDC says the loan can help you buy an existing business, buy a competitor or a supplier, complete a management or employee buyout, take over a family business, or refinance seller financing. It also offers extra financing for intellectual property, goodwill and client lists, and it lets you include one-time costs such as legal fees and moving expenses. Repayment is based on cash flow, with interest-only payments at the start.

What you need in place first

• A Canadian business that is already generating revenue.
• A clear transaction structure, either an asset purchase or a share purchase.
• An agreed purchase price, including how it was determined, plus a letter of intent and an expected closing date.
• Your required down payment, recent Notices of Assessment, and the business’s financial statements or tax returns.

How it sits beside other lenders

BDC says it complements other banks by taking on more risk and offering flexible financing. For acquisitions, it says a structure may combine your own investment, a business loan and seller financing, and the financing may also include cash flow or mezzanine financing, depending on the deal. A side-by-side look at BDC and chartered bank financing shows how the two types of lender differ.

Limits worth knowing

BDC does not offer prequalification and does not keep a list of businesses for sale. A new start-up or franchise start-up falls under its start-up financing instead. The share-or-asset question matters here: the federal program’s guidelines say the acquisition of shares is not eligible for a CSBF loan, so the same deal can look different at BDC and at a bank using the program.