How to buy a business in the GTA: what you need before you make an offer

Most deals that fall apart do so for three reasons: the buyer had no financing lined up, the lease could not be transferred, or the numbers did not hold up in review. Each of those can be checked before you spend money on lawyers. This is the order to do it in.

1. Get your own file ready first

• Down payment. BDC's rule of thumb is 20–30% of the price. Have proof ready: bank statements, investment statements, or a gift letter.
• Two years of Notices of Assessment from CRA. Every lender asks.
• A one-page resume of relevant experience. Lenders and franchisors weigh experience heavily. Running a similar business before is a big plus.
• Your credit score. Pull it now so there are no surprises.
• A budget that includes closing costs: legal fees, inventory, working capital for the first 3–6 months, and any licence or transfer fees.

2. Decide: asset purchase or share purchase

In an asset purchase you buy the equipment, inventory, name and goodwill, and you usually start with a new company and new licences. In a share purchase you buy the company itself, including its history and any hidden liabilities. Lenders need to know which one before they can approve anything. Your accountant and lawyer should decide this with you, because it changes tax and risk.

3. Check the lease before you fall in love

For most GTA businesses, the lease is the business. Ask for the full lease and every amendment, and look for:

• Years remaining, including renewal options. Lenders often want the lease to run at least as long as the loan.
• Whether the landlord must consent to an assignment, and what they can charge for it.
• The permitted use clause. Can you run what you plan to run?
• Additional rent (TMI): what it is today and how much it has gone up.

4. Verify the numbers

• 3 years of financial statements and tax returns, not just a seller's summary sheet.
• HST filings and POS or bank records that match the reported sales.
• Payroll, key staff, supplier contracts and any franchise agreement.
• An honest answer to "why are you selling?"

5. Offer, conditions, financing, closing

1. Letter of intent or offer with conditions: financing, review of the books, lease assignment, and licence approvals.
2. Financing application. Lenders such as BDC want the agreed price, how it was set, the structure, the down payment and the closing date. Start early.
3. Due diligence with your accountant and lawyer.
4. Landlord consent and licence transfers: liquor, lottery, tobacco, health and child care, depending on the business.
5. Closing, then a training or transition period with the seller.

Ways to finance it

• Canada Small Business Financing Program (CSBFP): government-backed bank loans for equipment, leaseholds and real property.
• BDC business purchase loans: these can include goodwill and transaction costs.
• Vendor take-back: the seller finances part of the price. It also shows the seller believes in the business.

This guide is general information, not legal, tax or lending advice. Every deal needs its own lawyer and accountant.

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