What costs should I expect when buying a small business in Canada beyond the price?

The cost of buying an existing business in Canada does not end at the purchase price. The Business Development Bank of Canada says anyone buying a business needs trusted legal and financial advisors to call on, and it lists a target timeline and budget among the items in an acquisition plan. Treat the price as one line in that budget and build the others from quotes, not guesses. For how to fund the purchase itself, see financing options for buying a business.

Advisors and their fees

BDC advises that if you hire external experts, you establish clear terms about retainers and fees, conditions of success, confidentiality and conflicts of interest. Ask each advisor for a written fee estimate and what would take the work past it. BDC also suggests involving your lawyer, accountant, transaction advisor and lender at the letter of intent stage, before formal due diligence, so some advisor costs start before the purchase agreement is negotiated.

Due diligence

BDC describes a thorough review of the target’s business prospects, finances and legal issues as critical, and warns against cutting corners to save costs or meet transaction timelines. It says the work consists primarily of a legal and financial review. Budget for the accountant’s review of the financial statements and the lawyer’s review of contracts, leases and corporate records, and ask whether any specialist report is needed for this type of business. More detail is in what due diligence costs.

One-time costs a lender may cover

BDC’s business purchase loan page says you can include legal fees, moving expenses and other one-time costs in your loan to reduce upfront expenses. That describes BDC’s program. Ask any other lender whether it will finance costs besides the purchase price, and which ones, before you rely on it.