Buying a business with a BDC loan: what it covers and what you need

BDC (the Business Development Bank of Canada) is a federal Crown corporation that lends to small businesses. It is often more flexible than a bank on a business purchase, because it will look at cash flow and goodwill, not only hard assets.

What a BDC purchase loan can cover

• Buying an existing Canadian business that is generating revenue, through an asset or share purchase
• Goodwill, intellectual property and customer lists, which bank and CSBFP loans often won't touch
• One-time costs such as legal fees and moving costs
• Refinancing a vendor take-back later

The repayment terms

• Repayments built around the business's cash flow
• Interest-only payments at the start are possible, which gives you breathing room in the first months
• Fixed terms, with no unexpected repayment demands without valid cause

How much down payment

BDC's own rule of thumb is 20–30% of the purchase price. Experience in the same industry, a strong business, or a seller who carries part of the price (vendor take-back) can bring the cash you need down.

What BDC asks for

• A clear structure: asset or share purchase
• The agreed price and how it was determined
• A letter of intent and expected closing date
• Your down payment amount and where it comes from
• Two years of personal Notices of Assessment
• The business's financial statements or tax returns
• A business plan with 12–18 month projections

Tips that speed up approval

1. Start before you sign. BDC does a detailed review, so begin as soon as you have a serious target.
2. Get the lease sorted early. A short or non-assignable lease can stop an approval.
3. Show your experience. A resume that matches the business carries real weight.
4. Combine sources. Many deals use a down payment, a CSBFP loan for equipment, BDC for goodwill, and a small vendor take-back.

General information only. Confirm current terms directly with BDC. This is not lending advice.

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