Raising finance and sector analysis

  • by Krystena Petrakas 

Interview with...

Steve Skrlac MBA, CFA – business broker for Keystone Business Brokers
Topics covered:
Difficulties of raising finance, popular sectors, about healthcare sector, when to raise finance
CV:
10 years’ corporate transactional experience at various levels and industries. Former business owner as well as executive of large Canadian telecomm company. Also worked in consultancy and in business banking
Expertise:
Represents buyers and sellers in business sales, in a wide range of sectors
Location:
Serves Toronto and Southern Ontario
 
Buying a business

Steve Skrlac discusses raising finance to buy a business and sector analysis


BusinessesForSale: Are there any differences in the buying process in Canada as opposed to, say, the US or other major markets?

Steve Skrlac: There are some very significant differences to buying a business. A key difference is the lack of financing available for the purchase of small or medium-sized businesses. Also, inventory financing in a change-in-control acquisition is virtually non-existent.

Culturally, Canadians tend to be more risk-averse than Americans and the levels of small-business ownership are lower in Canada on a per-capita basis

Culturally, Canadians tend to be more risk-averse than Americans and the levels of small-business ownership are lower in Canada on a per-capita basis. That being said, the Greater Toronto Area (GTA) receives a large number of new immigrants every year, a large proportion of whom tend to have the risk tolerance and entrepreneurial drive required to buy a business.

BFS: Are there any particular sectors which you think are interesting right now?

SS: Some popular businesses are in light manufacturing of a propriety product, distribution and health care.

However, overall the market is heating up across the board. There seems to be a new sense of optimism in the market that was absent during the worst days of the recession.

Good, profitable businesses, priced appropriately, will sell quickly, and many with multiple buyers too.

BFS: You mentioned healthcare as a popular sector...

SS: Businesses in this sector seem to be selling rather quickly and for a premium. Healthcare businesses are expected to be popular for the foreseeable future due to the ageing population. Therefore, buyers should expect to act fast when they find such businesses; ensure your financing is in place and be prepared to come in with a conditional offer relatively quickly.

BFS: So you should get your finance in quickly?

SS: The sooner the better. Financing is very difficult to get in Canada for a business purchase, so start early so you know how much money you will have access too.

It’s a good idea to build relationships with business bankers and talk to commercial financing consultants to learn more about your options.

Acquisition financing can be very difficult to come by in Canada. Canadian banks are very conservative, so a buyer has to have a fairly high down payment in order to make the transaction possible.