How to Raise Money to Buy a Business in Canada (2026 Guide)
by Raises.com
To raise money to buy a business in Canada in 2026, most buyers stack three sources: senior debt from a bank, credit union or BDC for roughly 60 to 80 percent of the price, a vendor take-back for 10 to 20 percent, and equity for the rest, either their own cash or outside investors pooled through a special purpose vehicle (SPV). Canadian buyers lean on the Canada Small Business Financing Program, BDC change-of-ownership loans and vendor take-backs, and they raise investor equity under the prospectus exemptions in National Instrument 45-106. Raises.com builds the investor structure, the documents and the model, and introduces debt and equity sources, for a flat fee with no success fee and no carry.
A Canadian acquisition in 2026 is paid for in three layers. Senior debt is sized off the target's cash flow. The seller carries a vendor take-back. Investors cover whatever is still short. The federal program most buyers ask about first has hard limits. The Canada Small Business Financing Program lends up to $1.15 million, and it will not finance a share purchase or lend to a holding company. On an asset purchase, no more than $500,000 can go to anything other than real property. Goodwill, other intangibles and working capital share $150,000 of that. So the senior debt comes from a bank, a credit union or BDC's Business Purchase or Transfer Loan, which does finance goodwill. The equity comes through a fund or SPV that can legally take it.
What lenders actually required
The figures below are quoted from Tre Brown, Head of Capital Markets at Raises.com, on the Raises.com podcast capital markets episode, and from published client transactions; they are what lenders required on real deals, not a promise of terms on yours.
| Layer | What it carried | Notes |
|---|---|---|
| Sponsor equity | 10 to 20% of the purchase price | Net worth or liquidity, and lenders prefer both |
| Senior term loan | About 3x EBITDA | Sized off cash flow, never the price |
| Asset-based facility | 70 to 80% of heavy assets | Equipment and inventory |
| Private credit | 10 to 12% of yearly revenue at 12 to 15% | Junior and unsecured |
| Seller note (vendor take-back) and rollover | Closes the remaining gap | Reduced cash at close on a July 2026 HVAC transaction |
Two tests sat above the stack. The first is the debt service coverage ratio: EBITDA divided by a year of principal and interest. Lenders treated 1.0 as the absolute floor. They wanted about 1.15, so a downturn does not stop the payments. The second is margin. Lenders wanted EBITDA at 30 to 40% of revenue on the service businesses they financed: HVAC, roofing, plumbing, general contracting. These were lower middle market deals with North American lenders. Tre's read is that Canadian lenders have usually been the more draconian on how much debt a deal can carry. US lenders now ask for the same higher net worth and cash. What differs in Canada is the program layer described above. Ask each lender for its own coverage floor, because BDC notes that healthy ratios vary between institutions.
Why Canada is a strong market for buying a business
- A wave of retiring owners across trades, manufacturing and services businesses in every province.
- Federal programs built for changes of ownership: the Canada Small Business Financing Program through banks and credit unions, and BDC direct lending.
- Sellers who qualify for the lifetime capital gains exemption on a share sale are often motivated to close.
- Provincial exemptions under NI 45-106 let a buyer raise from accredited investors, family, friends and business associates, or through an offering memorandum.
Lenders and programs in Canada
Canada has no SBA. The closest equivalents are the Canada Small Business Financing Program, delivered through banks and credit unions with loan limits in the low seven figures and sub-limits by use, and the Business Development Bank of Canada, which lends directly on changes of ownership. The seller note is called a vendor take-back (VTB) and it is standard on owner-operated deals. Loans under the Canada Small Business Financing Program are made by banks and credit unions with a federal guarantee, capped in the low seven figures with sub-limits by use. BDC lends directly on changes of ownership and often takes a subordinated position that lets the bank lend more. Above those programs, private credit and family offices in Toronto, Calgary and Vancouver fund larger deals.
Taxes, licensing and legal points that change the deal
Combined federal and provincial corporate rates on small business income are low in every province, and sellers who sell shares can shelter a portion of the gain under the lifetime capital gains exemption, which pushes many deals toward share purchases. A buyer then weighs the seller's tax preference against the liability protection of an asset purchase and prices the difference.
Trades licensing is provincial, and most provinces require a licensed individual to qualify a contracting business after close. Businesses regulated federally or provincially, such as healthcare and transportation, carry licences that must be transferred or reissued.
Where the deals are
Toronto and the Greater Toronto Area for manufacturing, construction, healthcare and logistics; Vancouver and the Lower Mainland for construction, port logistics and tourism; Calgary and Edmonton for energy services, construction and agriculture; Montreal and Ottawa for manufacturing, technology services and government suppliers.
Funding sources, ranked by how often they close a deal
| Source | Typical share of price | Cost (typical, varies) | Speed | Best for |
|---|---|---|---|---|
| BDC change-of-ownership loan | 60 to 80% | Bank rate plus a spread; 10-year terms are common for business purchases | 60 to 120 days | Deals with steady cash flow and a buyer with relevant experience |
| Vendor take-back (VTB) | 10 to 30% | Often 5 to 8% interest, 3 to 7 years | Negotiated at the letter of intent | Every owner-operated deal; ask every time |
| Investor equity through an SPV | 10 to 40% | Preferred return plus a share of profits | 30 to 90 days once documents exist | Buyers with a deal and no down payment |
| Conventional bank loan | 50 to 65% | Bank rate, shorter amortization | 30 to 60 days | Strong personal balance sheets |
| Private credit or mezzanine | 10 to 25% | Low to mid teens all in | 45 to 90 days | Deals above roughly $1M of EBITDA |
| Seller rollover equity | 5 to 30% | The seller keeps a minority stake | At the purchase agreement | Keeping the seller invested through transition |
| Earn-out | 5 to 20% | Paid only on performance | At close | Customer or key-person concentration |
How much money you actually need
Canadian lenders typically want the buyer to contribute 10 to 25 percent of the price in equity, with a vendor take-back accepted as part of the capital structure and sometimes postponed behind the bank. On a $2 million purchase that means $200,000 to $500,000 of equity, of which the VTB can carry a meaningful share when the seller is motivated. The rest can come from investors through a special purpose vehicle relying on the prospectus exemptions in National Instrument 45-106 (accredited investor, family, friends and business associates, or an offering memorandum). Lenders then test debt service coverage; 1.25x after a market salary for the buyer is the usual floor.
Raises.com is Canadian-founded and has worked with buyers in Ontario, British Columbia, Alberta and Saskatchewan, and the Texas HVAC close described below used the same playbook.
What this looked like on a real close
In July 2026 a Raises.com client, Texas construction operator Cody Sechelski, closed the inaugural acquisition of his services roll-up: a profitable Texas HVAC contractor in the roughly $2.4 million range, funded by an institutional senior credit facility, junior debt, a seller note, seller rollover equity and a structured equity gap, with minimal sponsor cash equity. He booked his first call in October 2025, so the engagement ran about seven months. The close was covered by Yahoo Finance, AP News, Morningstar and The Globe and Mail. Raises.com has helped clients raise more than $300 million across business acquisitions, real estate and funds, with documented case studies in the clients' own words, for a flat fee with no success fee and no carry.
The plan buyers use to fund a purchase here
- Qualify the target on cash flow. Three years of financial statements and tax filings plus a trailing twelve months before anyone quotes.
- Build the model. Sources and uses, debt service, coverage, and a downside case where 10 to 20 percent of revenue walks after close.
- Design the structure. Holding entity, operating entity, and an SPV if outside investors are involved. Confirm any license the business needs will be held by a qualifying person after close.
- Run two or three lenders in parallel. A single lender that quotes three weeks and takes two months is the most common reason closings slip.
- Negotiate the seller note at the letter of intent. Rate, amortization, standby terms and subordination are easier to win before the purchase agreement is signed.
- Raise the equity gap with the private placement memorandum, subscription agreement and operating agreement in hand.
- Close with a working-capital line already approved and a retention plan for the first 100 days.
Watch: How Business Buyers Raise Capital (Funds, SPVs, Syndications), and What It Costs
The Canadian rules that change the deal
On an asset purchase, GST/HST is charged on the taxable assets, typically the equipment and inventory. Section 167 of the Excise Tax Act lets you and the seller elect out of it. The election covers a purchase of all or substantially all of the property needed to carry on the business. The CRA reads that as generally 90% or more. If the seller is a GST/HST registrant, you must be one too. Make the jointly signed Form GST44 a closing deliverable. File it by the due date of your return for the first reporting period in which the tax would otherwise have been payable. Skip it and the tax applies at 5% GST in Alberta or 13% HST in Ontario. Goodwill stays excluded under section 167.1. On $600,000 of equipment and inventory in Ontario, that is $78,000 you fund at closing and claim back later as input tax credits.
A seller who lives outside Canada brings section 116 of the Income Tax Act into your deal. Property used in a business carried on in Canada is taxable Canadian property, and so is Canadian real estate. Without a CRA certificate of compliance from the seller, you are liable for 25% of its cost. For depreciable property such as equipment, the figure is 50%. Withhold it from the price. Remit it within 30 days after the end of the month you bought. Confirm the seller's residence in writing, since the CRA expects purchasers to take prudent steps to check it. There is no time limit on a purchaser assessment. A share purchase is caught only if more than half the company's value came from Canadian real estate, resource or timber property at some point in the previous 60 months.
Expect a Canadian seller to push for a share sale. In 2026 an individual can shelter up to $1,275,000 of capital gains on qualified small business corporation shares. That is the lifetime capital gains exemption, up from $1,250,000 for sales after June 24, 2024. A corporation selling its assets cannot claim it. You want the reverse. An asset purchase gives you a fresh tax cost to depreciate. It also leaves behind every liability you do not agree to take on. A share purchase hands you the company's known and unknown liabilities, tax included. Work out what the exemption is worth to the seller. Then trade price, indemnities or a holdback for the share structure rather than conceding it for free.
Set up the borrower before you apply. The CSBFP lends to the operating business, never to a holding company. It never lends against the part of the price the seller finances. Where an appraisal is required, it lends on the lower of cost and appraised value. BDC does not prequalify. It reviews an acquisition request once the main terms exist: a target, an agreed price and how it was set, an asset or share structure, a letter of intent with an expected closing date, your down payment, and two years of Notices of Assessment. The $350,000 figure attached to BDC belongs to its online Small Business Loan. That loan's listed uses are running costs such as inventory, hiring and suppliers.
Acquisitions and M&A: raising the money to buy in Canada
Every layer in that stack asks for paper before it funds. BDC wants a letter of intent and an agreed price. A lender wants a model that clears its coverage floor. Investors need an offering they can legally subscribe to. Raises.com takes that execution off the buyer. It forms the fund or SPV and drafts the private placement memorandum, the subscription agreement and the operating agreement. It builds the CFA-reviewed financial model and the data room, then runs debt and equity introductions against that package. Pricing is published on the booking page, before you pick a time.
- Book a strategy call with one of the advisors.
- See how the capital to buy a business is structured.
- Check your deal against the 2026 acquisition financing benchmarks.
Frequently asked questions
Is there an SBA-style loan to buy a business in Canada?
Not the SBA itself. Canada has no SBA. BDC's Business Purchase or Transfer Loan comes closest, because it finances goodwill. The Canada Small Business Financing Program will not fund a share purchase, and in an asset purchase goodwill, other intangibles and working capital share a $150,000 limit. A vendor take-back from the seller is standard.
How much do I need down to buy a business in Canada?
Lenders typically want 10 to 25 percent equity, with the vendor take-back accepted as part of the structure. Investors through an SPV under NI 45-106 exemptions can supply what you do not have.
Can I raise money from investors to buy a business in Canada?
Yes. Form an SPV (usually a limited partnership or corporation), prepare an offering memorandum or rely on the accredited investor exemption under NI 45-106, and file the exempt distribution report with the provincial securities regulator.
What is a vendor take-back?
The Canadian term for a seller note: the seller finances part of the price and is repaid over time, usually secured behind the bank. It is standard on owner-operated deals and it can be postponed to help the bank lend more.
Share purchase or asset purchase in Canada?
Sellers usually prefer a share sale to use the lifetime capital gains exemption; buyers usually prefer an asset sale for liability reasons. Most deals resolve it in the price and the indemnities.
Where to go next
- The full 2026 guide to raising money to buy a business, with all nine funding sources ranked.
- Buying a business with little or no money down.
- Raising the equity from investors through an SPV.
- How Raises.com structures and raises capital for acquisitions.
- Book a strategy call with one of the advisors. Pricing is on the booking page before you pick a time.
Sources
- ISED, Canada Small Business Financing Program guidelines (limits, goodwill, shares, holding companies, vendor financing)
- ISED, Canada Small Business Financing Program questions for small businesses ($1.15 million total)
- BDC, Business Purchase or Transfer Loan
- BDC, debt service coverage ratio
- CRA, GST/HST Memorandum 14-4, Sale of a Business or Part of a Business (section 167, Form GST44)
- CRA, GST/HST rates by province
- CRA, input tax credits
- CRA, IC72-17R6, section 116 procedures for non-resident vendors
- Income Tax Act, section 116
- CRA, indexed personal tax amounts for 2026 (lifetime capital gains exemption)
- RSM Canada, tax primer on asset versus share sale
- BDC, Small Business Loan
- Capital stack figures: Tre Brown, Head of Capital Markets at Raises.com, on the Raises.com podcast capital markets episode, and published Raises.com client transactions, including the July 2026 Texas HVAC acquisition.
Verified 2026-09-22. Tax and program rules change; confirm the current position with your own advisers.