Can I get a bank loan to buy into a partnership?

Lenders do finance people who buy into an existing business. A partnership interest is a different kind of purchase from equipment or property, though, and that affects which loan products fit and what the lender will want to see. Lenders also tend to engage late. BDC, for one, says it reviews a request once you have identified a business and negotiated the main terms.

What a lender will ask for

BDC lists the agreed purchase price, with how it was determined, and the business’s financial statements or income tax returns among the things it needs to see. For a buy-in, put these questions to the lender early: does it also want the partnership agreement and the partnership’s own statements, what security will it require, and will it ask for a personal guarantee? Have those answers before you commit to a price.

Why program-backed loans may not fit

The Canada Small Business Financing Program works by sharing risk with lenders. Its guidelines say a term loan finances eligible assets such as equipment, leasehold improvements, real property, intangible assets and working capital costs, and that goodwill counts when it is part of a going-concern purchase. They also say the acquisition of shares is not eligible, because the loan would go to a shareholder rather than to a small business financing eligible assets.

Raise the structure before you apply

The guidelines speak of shares. Whether a lender applies the same reasoning to a partnership interest is a question only that lender can answer, and the way the buy-in is structured can change which product fits. Raise structure with your lender and your lawyer before you apply, not after you sign. For the program’s reach in a purchase, see whether the CSBFP covers buying a business.