Blog

Few buyers pay cash for a business. Most Canadian acquisitions combine several sources of money, and a well-built financing plan is often what convinces a seller to choose you. Here are the main options.

Your equity

Lenders want to see that you have "skin in the game". Expect to contribute a meaningful share of the purchase price from your own funds, often 15% to 30% or more depending on the lender, the business and your experience. Newcomers should also plan for working capital after closing (payroll, inventory, rent) and for the costs of advisors, licences and settling in.

Bank and credit union loans

Canada's chartered banks and credit unions finance business acquisitions, usually secured against the business's assets and backed by a personal guarantee. They will look closely at:

• historical cash flow and how comfortably it covers the loan payments,
• your management experience in the industry,
• the quality of the financial statements, and
• any real estate or equipment that can serve as collateral.

BDC

The Business Development Bank of Canada (BDC) is a federal Crown corporation that offers loans specifically for buying or transferring a business, including share purchases. BDC often takes on financing that conventional lenders won't, and it can work alongside a bank or a vendor take-back.

The Canada Small Business Financing Program (CSBFP)

Under the CSBFP, the federal government shares the risk on loans that participating banks and credit unions make to small businesses. In 2026 a borrower can access up to $1.15 million in total:

• up to $1 million in term loans, of which no more than $500,000 can go to equipment and leasehold improvements (and of that, up to $150,000 for intangible assets and working capital), and
• up to $150,000 in lines of credit.

The CSBFP can finance eligible assets of a business you're buying, such as equipment, leasehold improvements and real property. It cannot cover the whole purchase price (for example goodwill or a share premium), so it is usually combined with other financing.

Vendor take-back (VTB)

With a vendor take-back, the seller lends you part of the purchase price, which you repay over time, typically from the business's cash flow. VTBs are common in Canadian small business sales because they:

• reduce the cash and bank debt you need at closing,
• keep the seller invested in a smooth handover, and
• signal that the seller believes the business will keep performing.

Terms are fully negotiable: amount, interest rate, repayment schedule, and whether payments are subordinated to the bank. With so many owners planning to retire and struggling to find buyers, sellers are often open to a VTB.

Earn-outs

An earn-out ties part of the price to future performance, for example a payment if revenue hits a target in the first two years. Earn-outs can bridge a gap between what the seller asks and what you think the business is worth, but they need careful drafting.

Putting it together: an illustrative structure

A hypothetical $800,000 purchase might be funded as:

Source	Amount	Share
Buyer equity	$200,000	25%
Bank / BDC term loan (including CSBFP-eligible assets)	$440,000	55%
Vendor take-back over 3–5 years	$160,000	20%

Illustrative only. Actual structures depend on the lender, the business and the buyer.

Tips for newcomers

• Build a relationship with a Canadian bank early, and open accounts as soon as you can.
• Gather proof of funds and their source, since lenders and immigration programs may both ask for it.
• Have a CPA prepare projections that show how the business will service the debt.

This article is general information only and not financial advice.

Sources: ISED — Canada Small Business Financing Program FAQ; Province of BC — Canada Small Business Financing Program; BDC — Business purchase or transfer loan.