What decides how much of the purchase price I need to put in myself when financing a business purchase?

There is no single percentage that applies to every Canadian business purchase, and this page does not quote one. BDC says the required down payment depends on the transaction, the business’s financial health and your situation. So the amount is a question for the lender on your specific deal.

The three things BDC names

• The transaction: how the purchase is structured, and what is being bought.
• The business’s financial health: its financial statements or tax returns are part of the file.
• Your situation: what capital you have and what you can show.

BDC lists knowing the required down payment among the readiness items for a financing request, alongside an agreed price, a structure and a letter of intent.

Where your share can come from

BDC’s guidance on the steps to buying a business says to be clear about how much capital you can put toward the purchase, how much equity other investing partners can contribute and what terms your bank can offer. It says most transactions include three sources of financing: internal or outside equity, including existing cash on the balance sheet, bank debt and vendor financing. Whether a lender accepts a given source toward the down payment is something to ask directly.

What a government-backed loan adds

Under the Canada Small Business Financing Act, a loan must be made by and with the consent of a lender, so the lender’s consent is still needed for the loan. This page does not quote program limits; they are set by the Act and regulations and can change, so check the current rules before building a budget around them.

Questions for each lender

Ask what down payment is required on your specific deal, what documents prove where it comes from, and whether vendor financing counts toward it. Get the answer in writing and compare it against your own savings before making an offer. If the answer is higher than you expected, Can I buy a business with no money down? covers the alternatives.