# Financing the purchase of a business in Canada

How buying an existing business is usually paid for — your own money, a bank or BDC loan, and the seller's — and what lenders read before they fund it.

Published: 2026-09-25 · Spark

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Buying a business that already trades is often easier to finance than starting one, because there is something real for a lender to read: years of revenue, customers, staff and a bank account with history in it. But it is rarely paid for with a single loan.

## How a purchase is usually paid for

Most small and mid-sized business purchases in Canada are put together from three pieces:

**Your own money.** Lenders want the buyer to have a real stake — often a fifth or more of the price. It shows commitment and it gives the lender room if the business has a rough first year.

**A loan from a bank or BDC.** The senior loan, secured against the business and often backed by a personal guarantee. BDC lends specifically for business purchases and frequently lends alongside a bank rather than instead of one.

**Money from the seller.** A **vendor take-back** (VTB) means the seller lets you pay part of the price over time, as a loan from them to you. It bridges the gap between what you have and what the bank will lend, and it tells the lender the seller believes the business will keep going without them.

Some deals add an **earn-out**: part of the price paid later, only if the business hits agreed targets.

## What lenders read

A lender financing a purchase reads two files at once:

**The business being bought.**
- Several years of financial statements and tax returns
- Recent bank statements — [the same ones any lender reads](/guides/six-months-of-statements)
- Who the customers are, and how dependent the business is on a few of them
- How much of it walks out the door with the seller: relationships, know-how, licences

**The buyer.**
- Experience in the industry or in running a business
- Personal credit and net worth
- How much of your own money is going in
- A plan for the first year, with realistic numbers

## Buying the shares or buying the assets

You can buy the company itself (its shares) or buy what it owns (its assets, customer list, equipment, name). The choice changes the tax, the liabilities you inherit and how the financing can be structured — for example, the [Canada Small Business Financing Program](/guides/canada-small-business-financing-program) can help finance an asset purchase but not a share purchase.

This is a decision for your accountant and lawyer, and it is worth having them involved before you agree a price.

## Where other financing fits

The purchase itself is bank, BDC and seller territory. Around it, other financing is often needed:

- **Working capital for the first months.** A new owner often needs a cushion while suppliers and customers get used to them. A [line of credit](/capital/line-of-credit) is the usual answer once the business is yours and trading through your account.
- **Replacing tired equipment.** [Equipment financing](/capital/equipment-financing) is secured by the machine and kept separate from the purchase loan.
- **Refinancing a vendor take-back early.** Sometimes worth it if the seller's terms are tight — compare the total cost first.

## Before you sign a letter of intent

1. Know how much of your own money you can put in without leaving yourself short.
2. Talk to a lender early. BDC, for example, reviews a purchase once you have found a business and agreed the main terms.
3. Ask the seller whether they would consider a vendor take-back. Many expect the question.
4. Get the last three years of financial statements and the last six months of bank statements, and have an accountant read them.
5. Work out the loan payments against the business's slowest year, not its best.

If it is a franchise location, see [franchise financing](/guides/franchise-financing) as well. For the broader route, see [how to get a business loan in Canada](/guides/how-to-get-a-business-loan-in-canada).