Initially, the third shop deal we looked at was very appealing and we went in guns blazing ready to make it happen. As we got further and further into looking at the deal, the shine started to wear off and we realized it just really was not worth anywhere near what they were asking. We would have had to make an insulting offer to get close to what we thought it was worth, so we opted to bow out rather than rocking the boat.
Secure financing
We have covered a lot of topics up to this point, but this is where the rubber hits the road. If you have evaluated everything above and you want to proceed with an offer, you must be able to back it up with cold hard cash. Given most of us are not drowning in money, this usually means some sort of borrowing. Let’s look at some options.
Banks
Bank loans are the most obvious and simple route, but as we all know, banks are not willing to lend you money until you no longer need it. You must be able to pony up a decent deposit, have some healthy business numbers of your own, and potentially some collateral to qualify for this option.
Government funding
Community Futures and BDC are both government-funded entities whose mandates are to support and grow small businesses provincially and nationally. Their loans and grants often have less stringent qualification measures but there are trade offs. These include smaller loan amounts and higher interest rates, often with a longer term, just to name a few.
Venture capitalists (Angels)
Venture capitalists (think Dragon’s Den) are private lending companies that can be quite flexible in the lending agreement. The cost of doing business here is higher interest rates and possibly a share of the company itself. This means after you pay off the initial loan you will still be paying the lender dividends in perpetuity until you buy your shares back.
Private investors/partners
Similar to the venture capitalists mentioned above, private investors can be very flexible and accommodating. On the plus side, you may have a personal relationship with this lender, or they may be a prominent local business owner. Given their personal stake in your success, they may be willing to help coach and guide you to the promised land. A stake of your business and some loss of control may be your trade off in this scenario.
Whatever route you go, keep in mind that you are only receiving money so that others may also profit from your achievements. Banks are unwavering, interest rates do not play favourites, venture capitalists are known for being ruthlessly aggressive, and who hasn’t heard about a partnership nightmare? Make sure the financing you arrange will not keep you up at night.
