Thanks so much for the kind words! Love it.

You're watching a ton of videos!

Glad it was helpful!

Thanks Victor

Thanks Ben for the kind words.

Thanks Patrick

Great question. I think it depends on the risk profile of the buyer. An individual buyer faces different risks than a strategic buyer who is already in the industry. Those guys sometimes pay 100% cash at closing and it's ok for them because their risk position is determined by the new combined entity. For the individual buyer, the true due-diligence is only complete after they've had it for over a year, in my opinion, and they really know the business and have lived with the closets and skeletons for a bit to make sure they're friendly.

@@DavidCBarnett This makes sense. Thank you for your response.

Thank you for your valuable insights David.

This is why you want a good relationship with a local business banker. You could bounce several ideas off of them. Their job is to get loans out and they'll try and find a way to do it with you. For example, with so much seller financing, maybe the assets could support a conventional loan and you may not need to use the 7a program. If the assets are solid enough, maybe a leasing company would finance them, then your balance sheet won't matter.

If I were you I would get an LTV of 70% of the assets from a conventional loan from the bank on a 5 year amortization, then 50% seller finance on a second lien basis would be paid back on a 5 year ballon. This gives you an extra 20% as operating capital. Banks should be comfortable with this structure and considering seller carry back as equity. I would call up many banks and ask “do you consider subordinate debts such as seller finance, mezz, unsecured debt etc. as equity of they are a true payment in kind” usually they do and it would allow this transaction to get through. Alternatively you could just get a JV partner to put the extra equity in.

If you're referring to government programs that make it easier to borrow there are two. Sort of. The Canada Small Business Finance Act program allows for the lender to get a gov't guarantee on 90% of the loan balance on things such as machinery, equipment, real estate and leasehold improvements. They don't look at a business purchase as one big 'deal.' They look at these components only. The other 'program' is a bank owned by the government called the BDC. They finance equipment, buildings, etc and also do loans based on cash flow. Get to know actual people at the bank and your local BDC and talk to them about deals you want to do. Also, both love to have certain minimum debt to equity ratios so make sure you're not broke. Also the bank program won't finance goodwill and the BDC knows it's etherial so this is why seller financing is usually part of most deals in Canada to some degree. And, sometimes a substantial degree.

I e never even heard of this before. Can you post a link to a company that offer this kind of insurance?

@@DavidCBarnett www.chubb.com/us-en/business-insurance/transactional-risk.html

Thanks Gekko!

Depends on the tangible asset value. I like to see the seller finance the goodwill portion of the deal. ABLs usually charge higher interest than banks. If you can find a deal where the ABL financing only takes up half your cash flow, then I'd say you've negotiated a very good price. Especially for these days.

Hmm, without knowing anything about your deal, it's hard to comment. I would recommend you book a call so I can talk the deal through with you. www.CallDavidBarnett.com