Can I buy a business with little cash and heavy vendor support?

A purchase funded mostly by the seller (see seller financing) is possible to propose, but it is not something a buyer controls alone. A lender looks at the full structure: what you put in, what the vendor carries and what the lender is asked to fund. Public guidance from BDC and the Canada Small Business Financing (CSBF) Program shows where the lines sit, and what to ask before you commit to a price or a vendor take-back (VTB) note.

What BDC says about the down payment

BDC states that the required down payment depends on the transaction, the business’s financial health and your situation. It adds that a financing structure may combine your own investment, a business loan and seller financing, and that BDC assesses the complete structure when reviewing a request. It also says you and the seller must agree on a purchase price before applying. That means the vendor’s role needs to be part of the deal from the start, not added afterwards.

What the CSBF Program will not finance

The program’s guidelines say that when a vendor finances part of the purchase price, the amount of that financing is not eligible for a CSBF loan. They also say the acquisition of shares is not eligible, because the loan is advanced to a shareholder instead of a small business. The guidelines list goodwill as an intangible asset a CSBF term loan can finance if it is part of a going concern purchase. So a heavily vendor-funded deal leaves a CSBF loan covering only the parts that qualify.

What heavy vendor support asks of the seller

BDC notes that a seller who remains involved after the sale, such as through vendor financing or an earn-out, has an especially strong interest in a seamless transition. Before relying on that, ask what security the vendor expects, whether the lender will accept the note ranking behind its own loan, and what happens to the note if the business struggles. BDC also lists refinancing seller financing among the uses of its purchase or transfer loan, so ask whether that is available later.