Buying an SME is often a shortcut to viable entrepreneurship. But to make a takeover a reality, financing is often the cornerstone of the project. In 2025, financing an acquisition rarely involves a single player. It relies on a smart structure , combining personal capital, bank financing, government support, and sometimes, the seller's involvement.
This guide provides you with a clear overview of the options available in Quebec, the institutions involved, the pitfalls to avoid and the concrete steps to take.
Financing an acquisition: a dynamic specific to the takeover
Financing the purchase of a business is nothing like financing a startup. The business already exists, generates EBITDA (or operating profit), and has assets, a track record, and a team. This reassures lenders.
But most institutions—especially commercial banks— do not like to finance this type of project alone . They prefer to see a balanced package that includes:
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A personal down payment (usually 15% to 30%)
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A balance of sale (payment deferred by the transferor)
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A commercial bank loan
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Support from specialized organizations such as BDC, PME MTL, Investissement Québec or Evol
This risk sharing significantly increases the chances of approval.
Financial institutions: who finances what?
Here is an overview of the key players who finance business takeovers in Quebec, with their strengths and limitations:
|
Institution |
Benefits |
Disadvantages |
|---|---|---|
|
Desjardins |
Strong regional presence, good SME tools |
Slow process, rigid formalism |
|
National Bank |
Good expertise in entrepreneurial succession |
Often requires significant personal guarantees |
|
RBC / TD / CIBC / BMO |
Competitive rates, solid structures |
Less flexible with projects without tangible assets |
|
BDC |
Specialist in SME financing, accepts risky projects |
Higher rates, require a robust business plan |
|
Investment Quebec |
Can co-finance with the bank, offers guarantees |
Longer process, in-depth analysis of the project and the buyer |
|
PME MTL / SADC / Evol |
Human support, additional loans |
Limited amounts, often conditional on a bank loan |
Investissement Québec plays an increasingly strategic role: co-financing, guarantees, and mezzanine loans. They are particularly active in manufacturing succession, food processing, and regional growth.
The heart of financing: a structured and coherent assembly
Here is an example of a typical setup for a $500,000 acquisition:
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Personal down payment : $75,000 (15%)
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Sales balance : $100,000 (20%)
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Bank loan (Desjardins / BNC) : $225,000 (45%)
-
Supplementary loan (BDC / PME MTL / Investissement Québec) : $100,000 (20%)
This type of arrangement demonstrates that multiple parties believe in the project, which reassures institutions. It's rare for a bank to take on 100% of the risk alone without external guarantees or a balance of sale.
Market valuation vs. emotional value
One of the major obstacles to financing is the gap between the value perceived by the seller and the actual market value .
Many sellers value their business based on years of work, sacrifices, or “potential” numbers, rather than current profitability (EBITDA) or concrete comparables.
Banks, on the other hand, only finance what is demonstrable and justifiable .
This is why an independent evaluation or an automated estimate via AI , like the one offered by trnsfr , becomes a key tool: it allows the parties to come together on a realistic price.
Assessment as a condition of financing (contingency)
In most transactions, financing is contingent on a reasonable market valuation . If the bank estimates the business is worth $400,000, it won't lend $500,000—even if the seller wants to.
A good buyer must therefore include in his letter of intent an evaluation contingency clause, allowing the offer to be adjusted if the estimated value is too low to obtain financing.
Use our letter of intent template to structure your offers intelligently.
Realistic Timeline for Acquisition Financing
|
Period |
Main steps |
|---|---|
|
3 to 6 months before |
Business identification, initial contact, surface area assessment |
|
Week 0 |
Signing of a letter of intent (with estimated price + clauses) |
|
Weeks 1 to 3 |
Financial planning, discussions with lenders, business plan |
|
Week 4 to 5 |
Submission of official requests (banks, BDC, Investissement Québec) |
|
Weeks 6 to 8 |
Approvals, adjustments, coordination between partners |
|
Weeks 8 to 10+ |
Final due diligence, negotiation of clauses, release of funds |
Good coordination between parties is essential. Trnsfr offers tools to manage each step: preparation for purchase , legal models , EBITDA calculator .
FAQ – Financing a business takeover
Can you finance 100% of a business purchase?
Very rarely. A personal down payment is almost always required, although it may be modulated by a balance of sale.
What is the difference between BDC and Investissement Québec?
The BDC is a federal bank specializing in SMEs. Investissement Québec is a provincial organization that can co-finance and offer loan guarantees.
Do banks accept unprofitable businesses?
No, except in exceptional circumstances. Profitability (positive EBITDA) is a central criterion for all bank financing.
Does a sales balance count as equity?
Yes, often. It demonstrates that the seller believes in the stability of his business.
Can I use a grant for the purchase?
Very rarely. Grants are usually aimed at post-acquisition growth, not the purchase itself.
In summary
Successfully financing the purchase of a business is based on three pillars:
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A fair and well-structured assessment
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A balanced and shared financial package
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Serious and documented preparation
Institutions want to see a well-equipped buyer, a supportive seller, and a healthy business. Trnsfr helps you connect all these elements with a simple platform, practical tools, and resources tailored to each step.
