Settle the financing before you sign the purchase agreement. Your lender's conditions become your closing conditions, and an agreement without a financing condition puts the risk of a declined loan squarely on you — usually along with your deposit.
Our charges include applicable taxes. Disbursements are extra and billed at cost — itemized upfront, in writing, never hidden.
From $3,388.87 taxes included
Most Ontario small-business acquisitions are paid for from three or four sources at once: the buyer's own equity, senior bank debt, a vendor take-back note from the seller, and sometimes an earnout that defers part of the price until the business performs. Lenders expect the buyer to have meaningful cash in the deal. How much depends on the lender, the sector and the quality of the earnings, and it is the first question to ask, before you agree a price.
Government-backed lending helps on asset deals and rarely on share deals. Loans under the federal Canada Small Business Financing Act, made through ordinary banks and credit unions, can fund equipment, leasehold improvements and real property, and a limited slice of intangible assets and working capital — but they cannot be used to buy shares, and cannot refinance a vendor take-back. The Business Development Bank of Canada lends on acquisitions directly and often sits alongside a chartered bank.
A vendor take-back does more than fill a funding gap. It keeps the seller invested in the transition, and it gives you something to set indemnity claims off against if the business is not what was represented. Expect the bank to require the seller's note to be postponed to its own security, with no payments while you are in default. Earnouts are a different animal, with their own tax treatment, and they need accounting advice before the structure is agreed, not after.
A commitment letter is not a loan. It is an offer with conditions, and every one of those conditions is work someone has to do before closing: appraisals, a Phase I environmental assessment where real property is involved, insurance naming the lender, corporate and lien searches, tax and WSIB clearances, and confirmation that the lender is satisfied with its own diligence. Read it as a checklist the day you get it and hand it to your lawyer immediately.
The security package is standard and takes time to put in place. Expect a general security agreement registered against the borrower under Ontario's Personal Property Security Act, a charge on any real property, an assignment of insurance, and personal guarantees from the buyer's principals — frequently supported by a spouse, who should get independent legal advice before signing. Existing registrations against the target have to be discharged or subordinated, with payout statements produced for closing.
Who borrows matters. If the business you are buying is going to guarantee or secure the debt used to acquire it, its directors have to consider whether the company benefits and whether it remains solvent, and the Business Corporations Act (Ontario) restricts distributions and share redemptions where solvency tests are not met. Interest deductibility, and whether the acquisition debt is later pushed into the operating company by amalgamation or wind-up, is a tax question under the Income Tax Act. Decide it with your accountant before the credit agreement is signed.
The financing condition is the live negotiation. Buyers want one; sellers hate them because they turn a signed deal into an option. The workable middle is a short, dated condition with a firm deadline, an obligation on the buyer to apply promptly and in good faith, and a duty to share the lender's decision when it comes. If you waive the condition to win the deal, understand what you are doing: you are agreeing to close with your own money if the bank changes its mind, and your deposit is on the line.
Closing is a same-day choreography. The lender advances into your lawyer's trust account against a signed direction, existing secured creditors are paid out and discharges registered, the price is adjusted for working capital, and any holdback for indemnity claims goes into escrow. Your lawyer is also required by the Law Society of Ontario's client identification and verification rules to confirm who you are and where the money came from, so start the source-of-funds paperwork early rather than the week of closing.
The single most common cause of a blown closing date is starting the financing after the letter of intent instead of alongside it. Lenders want several years of the target's financial statements, its tax filings, an accounts receivable aging, the lease, the signed purchase agreement, and a personal net worth statement from you. Assume weeks, not days, and set the closing date around the lender's realistic timeline with a buffer built in.
Almost never with bank debt alone. Lenders want the buyer to carry real risk, and a buyer with nothing at stake is a credit they price accordingly or decline. What does happen is a blended structure: a smaller cash contribution, a larger vendor take-back, and an earnout that shifts part of the price onto future performance. Sellers will accept that when they believe in the buyer and the business, and they will want security and a personal guarantee in exchange.
Some will, less generously than against hard assets. A lender advances comfortably against equipment, receivables, inventory and real property because it can realize on them. Goodwill is worth what the cash flow is worth, so lending against it depends on the quality and stability of the earnings, customer concentration, and whether the business runs without the departing owner. This is one reason deal structure and financing have to be decided together rather than in sequence.
On an owner-operated acquisition, expect to. Banks lend to the corporation but look to the people behind it, and on smaller credits they often want a spouse to guarantee as well or to sign off on a charge over jointly owned property. Negotiate the scope before you sign: a cap, a release once agreed performance targets are met, and confirmation that the guarantee is limited to this facility rather than all present and future obligations. A guaranteeing spouse should have independent legal advice.
Frequently it does, but it is a corporate decision the target's directors have to make properly. They need to consider whether the company gets a benefit and whether it can still meet its obligations afterwards, and the Business Corporations Act (Ontario) limits distributions and redemptions where solvency tests are not satisfied. Get the resolutions, the benefit rationale and the tax analysis done in advance; this is not a form to sign in the boardroom on closing day.
Our published flat fee for mergers and acquisitions work starts at $3,388.87 with taxes included, covering the purchase agreement, the ancillary documents and the closing. Lender-side documents are prepared by the lender's counsel and their fees are usually charged to you under the commitment letter, so budget for that separately. Disbursements — searches, registrations, discharges — are extra and billed at cost, itemized in writing before we incur them.
Open your file tonight — a licensed Ontario lawyer will confirm everything with you by tomorrow.