How to Raise Money to Buy a Business in Toronto and Ontario (2026 Guide)
by Raises.com
To raise money to buy a business in Toronto and Ontario 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). The Greater Toronto Area has the deepest supply of owner-operated manufacturing, construction and services businesses in Canada, and the country's largest pool of accredited investors. 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.
Buyers in Toronto and across Ontario fund an acquisition in 2026 in three layers. Senior debt is sized off the target's cash flow. The seller carries a vendor take-back. Investors supply the equity. The federal program most of them ask about first has hard limits. The Canada Small Business Financing Program lends up to $1.15 million and 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. The senior debt comes instead from a bank, an Ontario credit union or BDC's Business Purchase or Transfer Loan, which finances goodwill. The equity comes through a fund or SPV that can legally accept 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. Debt service coverage came first: EBITDA divided by a year of principal and interest. Lenders held 1.0 as the floor. They wanted about 1.15, so a downturn does not stop the payments. Margin came second, with EBITDA at 30 to 40% of revenue on the service businesses they financed: HVAC, roofing, plumbing and 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. In Ontario the program layer is federal; the provincial differences are in the rules below. Ask each lender for its own coverage floor, since BDC notes that healthy ratios vary between institutions.
Why Toronto and Ontario is a strong market for buying a business
- Thousands of owner-operated manufacturers, contractors and service businesses across the GTA approaching retirement sales.
- Pearson Airport and the 400-series highways anchor logistics and distribution businesses.
- Healthcare, home care and home services businesses across a growing population.
- Canada's largest accredited-investor and family-office base for the equity piece.
Lenders and programs in Toronto and Ontario
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. Canada Small Business Financing Program loans are available through every major bank and Ontario's credit unions, BDC lends directly on changes of ownership from its Toronto offices, and Toronto's private credit funds and family offices cover deals above those programs.
Taxes, licensing and legal points that change the deal
Ontario's combined federal and provincial small business rate is low on the first several hundred thousand dollars of active income, and sellers who sell shares can use the lifetime capital gains exemption. Ontario also levies land transfer tax when real estate is part of the deal, doubled inside the City of Toronto.
Ontario licenses many trades through Skilled Trades Ontario and requires licensed individuals in compulsory trades such as electrical and plumbing; the Electrical Safety Authority licenses electrical contractors. Confirm who qualifies the business after close.
Where the deals are
Mississauga, Brampton and Vaughan for manufacturing and logistics; Markham and Richmond Hill for technology-adjacent services; Toronto proper for healthcare, professional services and construction; Hamilton, Kitchener-Waterloo and Oshawa for manufacturing and industrial services.
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 has worked with buyers across the GTA, 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 Toronto and Ontario rules that change the deal
Ontario's 13% HST makes the section 167 election under the Excise Tax Act worth real money on an asset purchase. It 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 registered for GST/HST, you must be 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. Without it, HST applies to the equipment and inventory, while goodwill stays excluded under section 167.1. On $600,000 of hard assets that is $78,000 you fund at closing and claim back later as input tax credits.
Expect the 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 under the lifetime capital gains exemption. A corporation selling its assets cannot claim it. You want the reverse: a fresh tax cost to depreciate, and none of the liabilities you did not agree to take on. A share purchase inherits them all, tax included. Put a number on the seller's exemption and trade for it. A seller who lives outside Canada brings section 116 of the Income Tax Act into the deal. Without a CRA certificate of compliance, you are liable for 25% of the cost of the business property, and for 50% of the purchase amount on depreciable property such as equipment. Withhold it from the price and remit it within 30 days after the end of the month you bought. There is no time limit on a purchaser assessment.
A building in Toronto means land transfer tax twice. Ontario charges 0.5% on the first $55,000, 1% up to $250,000, 1.5% up to $400,000 and 2% above that on commercial land. The City of Toronto's municipal tax uses the same bands for commercial property. On a $3,000,000 commercial building, each tax comes to $56,475. That is $112,950 at closing. Structure decides it. An asset purchase that conveys the building triggers both. A share purchase generally does not, because title stays with the company, though there are exceptions. Put the building into the share-versus-asset math from the first offer.
Ontario repealed its Bulk Sales Act on March 22, 2017. An asset deal no longer needs bulk sales compliance or the waivers and indemnities that stood in for it. One provincial check survived. Have the seller request a Retail Sales Tax Clearance Certificate from the Ministry of Finance at least two weeks before closing. A seller with no retail sales tax history gets a certificate letter instead. A purchaser who closes without a copy can be held liable for retail sales tax the seller owes. Since the 2011 Budget, the certificate also covers tax owed under Ontario's fuel, gasoline, tobacco and race tracks tax acts. Federally, section 325 of the Excise Tax Act reaches a buyer for the seller's GST/HST debts only where the buyer is a spouse, a minor or not at arm's length. Even then, the liability is capped at the gap between fair market value and what the buyer paid. Buy the shares instead and the company's arrears come with it.
If the buyer is an Ontario corporation under the Business Corporations Act, two rules apply. Since July 5, 2021, it needs no resident Canadian directors. A buyer from outside Canada no longer has to find Canadians for the board. Since January 1, 2023, it must keep a register of every individual with 25% or more of its votes or value. That will include any investor who comes in at that size. And if the corporation is a holding company, the CSBFP will not lend to it, so any CSBFP loan sits in the operating company.
Acquisitions and M&A: raising the money to buy in Toronto and Ontario
An Ontario acquisition stack asks for paper at every layer. 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 Toronto and Ontario?
Not the SBA itself. Canada has no SBA, and Ontario buyers use the same federal tools. 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 Toronto and Ontario?
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 Toronto and Ontario?
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 Ontario Securities Commission.
What businesses are buyers acquiring in the GTA?
Manufacturing and machine shops, construction and trades, logistics and distribution, healthcare and home care, and professional services.
Can I raise investor equity in Ontario without a prospectus?
Yes, under NI 45-106 exemptions such as the accredited investor exemption, the family, friends and business associates exemption, and the offering memorandum exemption, with an exempt distribution report filed with the Ontario Securities Commission.
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
- Government of Ontario, calculating land transfer tax
- City of Toronto, municipal land transfer tax rates
- Treadstone Law, share sale versus asset sale for business property in Ontario
- Osler, repeal of Ontario's Bulk Sales Act
- Stikeman Elliott, Ontario repeals its Bulk Sales Act
- Ontario Ministry of Finance, RST clearance certificate checklist
- Excise Tax Act, section 325
- Stikeman Elliott, OBCA resident Canadian director requirement removed
- Torys, OBCA register of individuals with significant control
- 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.