Financing a glazing contractor acquisition

If you are working out how to fund the purchase of a glazing contractor, start with what a lender can take as security and what makes this business harder to finance. Glazing has equipment that can be listed and valued, and it also has project timing, warranty exposure and relationships, which are not physical assets. BDC says a financing structure may combine your own investment, a business loan and seller financing. This page covers the assets, the programs, and what to ask. It is not financial advice, and no lender is obliged to approve any request.

Equipment is the asset a lender can see

Suction lifters, cranes, swing stages and service vehicles can be identified, inspected and valued, so ask whether a lender would treat them as security. Ask for a list with serial numbers, age, condition and any existing financing. The Canada Small Business Financing Program guidelines say a term loan may be used to finance equipment, and BDC offers an equipment loan. Ask each lender how it values used glass-handling equipment, whether it will rely on an appraisal, and what it wants registered against it. The CRA also publishes depreciable-property classes covering machinery and equipment, which your accountant can use to confirm what the books show against the equipment list.

Goodwill and the client relationships

Ask how much of the price rests on the project record and customer relationships. The CSBFP guidelines say a term loan can finance intangible assets, and list goodwill if part of a going concern purchase, and permits and licences used in operating eligible assets. BDC says it offers extra financing for intellectual property, goodwill and client list. Read the current rules directly, because limits and conditions are set by the program. Ask how a lender would view a business whose bids depend on the owner.

Three features to raise with a lender

Three features deserve a direct conversation. The first is the warranty tail: be ready to explain how seal-failure and water-infiltration claims are handled and whether insurance responds. The second is the owner’s role in estimating and customer relationships; ask whether a lender would want to see it transferred before closing. The third is bonding: ask whether the commercial contracts you are taking on require it. Ask your surety whether it will continue for a new owner, and ask your lender whether it will lend alongside a surety’s requirements.

Structure and seller financing

BDC says you and the seller must agree on a purchase price, and that you need a clear transaction structure, either an asset purchase or a share purchase. It also lists refinancing seller financing among its offerings. If the seller will take back part of the price, ask your lawyer how that note ranks against the lender’s security, what happens on default, and whether payments depend on warranty claims being resolved. If the seller stays on for a transition, ask whether they would link some of the price to hand-over milestones.

Questions to put to a lender and the seller

To the lender: which assets will you take as security, what will you require for the personal guarantee, how do you treat a project business with uneven cash flow, and what must be in place before closing? To the seller: will you provide a vendor take-back, on what terms, and will you remain involved? To both: how will working capital be funded in the first months, when payments on open projects arrive on the client’s schedule? Read the CSBFP guidelines and BDC pages before you meet, so your questions reflect the programs.

Sequence the lender conversations

BDC says it can review a financing request once you have identified a business and negotiated the main terms of the purchase. So settle the price and structure in a letter of intent before you start a formal application, but talk to lenders informally earlier so you know what they will ask for. The glossary entry on the CSBFP explains the program in plain terms, and financing a trades acquisition covers the wider picture for trades businesses. Keep a record of what each lender asked for so you can answer the next one faster.

Compare more than the rate

Compare what each lender takes as security, whether it requires a personal guarantee, how it treats prepayment and what ongoing reporting it requires. The article on CSBFP versus conventional lending sets out the differences. Ask your accountant to model the repayments against the cash flow of a project business, including a slow quarter, so you know how the loan behaves when payments from clients arrive late.

• An equipment list with serial numbers, age, condition and existing financing.
• A recast of earnings and an open-project schedule for the lender.
• Your questions for the surety on bonding after a change of ownership.
• Draft vendor take-back terms, reviewed by your lawyer.
• A working-capital plan for the first months after closing.