In 2019 alone, $32.6 billion in new loans was disbursed to small businesses and medium-sized businesses across Canada. The vast majority of new business owners rely on credit to get their feet off the ground. The question becomes, “what is the best lending option for a small business owner in B.C.?”. Before you start searching for your dream opportunity, consider the type of business loans available that best suit your needs and interests. Here’s how to buy a business with no money in British Columbia.
Your Lender Options for Buying a Business With No Money in Vancouver
Before you seek external lending, try to raise as much of your own money as you can. Friends and family are usually willing to offer lower interest rates than you’d find on a traditional bank loan. If they can’t contribute financially, they may be willing to help other ways, such as through sweat equity!
You never want to blow through your entire savings; you need enough money if an emergency were to arise. So, that shouldn’t be your next option if you can’t acquire funding on your own. Consider the following lender options instead.
- Personal Loan
There are many different short-term small business loans available through private banks, equity firms, and other venture capitalists. The right option for you boils down to your specific situation. Those with a decent credit score or a higher down payment get approved for more favorable repayment terms. In any case, be sure to carefully consider a loan’s repayment schedule, loan and interest fees, collateral requirements, and all other details before committing. You’ll also need to prepare a business plan to present. The plan should include all facets of handling your business, from managing cash flow to acquiring real estate to the general business sales process.
- Federal Government Assistance
The Government of Canada’s small business loan program can help you acquire new business lending. This group partners with financial institutions to offer more favorable lending options to small businesses and medium-sized businesses. Also, you can find grants for buying an existing business through its subsidiary, Innovation Canada. Provide some details about your business entity, and you’ll find various funding sources, loan and investment options, and other general information for starting or buying a business. In addition, be sure to seek additional resources available for Canadian businesses through groups such as the Canadian Federation of Independent Businesses or the Business Development Bank of Canada.
- Seller Financing
It may be ideal for the current owner to finance a portion of the purchase price personally. Of course, there are risks associated with an owner financing arrangement, mostly long-term involvement. If you’re in a good business standing, this person will continue to retain a portion of profits. But, if you fail, this debt gets added to your existing tab. If you choose this route, be sure you and the seller have clear, open communication about your arrangement details. If the two of you can work well together, this could be very beneficial as you’re able to take advantage of fewer fees, more negotiable terms, and vested seller interest.
- Angel Investors/Silent Partners
Business buyers can also finance through an angel investor or silent partner, which means they would own a portion of your business in exchange for startup or working capital. As with most equity financing, buyers tend to pay higher rates of return. This is usually an option for someone who has difficulty acquiring favorable financing terms from a standard bank. However, in these situations, you typically receive a partner who has a vested interest in either your industry or in long-term business operations. They often aid the company way beyond financial compensation, if requested. If you’re not interested in this help, you can work with a partner who wants to cut/collect a check and disappear.
Getting a Loan to Buy a Business in British Columbia
The business acquisition process is very intricate, and finding the right financial arrangement is one of the most important steps in this process. Pacific M&A and Business Brokers is a relationship-driven brokerage group dedicated to helping you achieve your entrepreneurial goals – and we understand that starts at the very beginning. Our advisors are ready to embark on one of the biggest journeys of your life with you. Start searching for local business opportunities today! Contact us for help landing your dream business.