Guides for buyers · 7 min read

How to finance buying a business in Canada

By Colton Doan, founder of Sellvara · Updated October 30, 2026

Very few people buy a business entirely with their own money. Most Canadian small business purchases are funded by a combination of the buyer's savings, a loan, and often some financing from the seller. Understanding how lenders think, and what each source of money involves, helps you work out what you can afford and makes you a stronger buyer.

This guide is general information. Lenders' rules and government program limits change, so check current terms with the lender directly.

The usual mix

A typical small business purchase is funded by some combination of:

1. Your own money (equity): savings, investments, or money from partners or family.
2. Senior debt: a loan from a bank, a credit union, or the Business Development Bank of Canada (BDC), usually secured on the business's assets.
3. Vendor financing: the seller lets you pay part of the price over time. See vendor take-back financing.

How these are split depends on the business, the price, your experience and the lender. A common pattern is a loan covering the largest share, with the buyer's equity and vendor financing making up the rest.

How much of your own money you'll need

Lenders almost always want you to invest your own money. It shows you're committed, and it means you share the risk. How much depends on the deal, but it's often a significant minority of the price. Lenders will look at where it comes from too: money borrowed from somewhere else may not count the same way.

Your equity can sometimes be supplemented by investors or partners, but this changes who owns the business, so get legal advice before you agree to anything.

Bank and credit union loans

Banks and credit unions lend to buyers of established businesses, usually secured on the business's assets and supported by its cash flow. They'll want to see:

• the business's financial statements and tax returns for the past few years;
• that its cash flow can comfortably cover loan payments after paying you a reasonable salary;
• your own financial situation and credit history;
• your experience, especially in the same industry;
• a business plan for how you'll run it.

Businesses with lots of equipment, property or inventory are often easier to finance than those whose value is mostly goodwill, because the lender has more to fall back on.

BDC

The Business Development Bank of Canada (BDC) is a federal Crown corporation that lends to Canadian businesses, including for business acquisitions and ownership transitions. BDC can sometimes work alongside a bank, or finance deals a bank finds harder to fit, such as those with a large share of goodwill. Their terms and criteria are on their website, and it's worth speaking to them early.

The Canada Small Business Financing Program

The Canada Small Business Financing Program (CSBFP) is a federal program that makes it easier for banks and credit unions to lend to small businesses by sharing the risk of loss with them. The loans are made by participating lenders, not the government. The program can help finance eligible costs such as equipment, leasehold improvements and real property, and in some cases intangible assets and working capital, up to set limits. Not every part of a business purchase is eligible, so ask your lender how it could apply to your deal and check the current limits on the Government of Canada's website.

Vendor financing

If the seller agrees to take back part of the price, you pay it over time, often from the business's profits. Banks often like to see vendor financing because it shows the seller believes in the business. Expect the seller to ask for security, and the bank to require that its loan is repaid first. Read more in vendor take-back financing explained.

Earn-outs

In an earn-out, part of the price is paid only if the business hits agreed targets after the sale. Earn-outs can bridge a gap when you and the seller disagree on the value, but they need clear definitions to avoid disputes.

Other sources

• Partners or investors, who provide money in exchange for a share of ownership.
• Equipment financing or leasing for specific assets.
• Lines of credit for working capital after you take over (not usually for the purchase itself).
• Personal assets, such as home equity. This increases your personal risk, so get advice first.

Getting financing-ready

• Talk to lenders before you find a business. Many will discuss what they might lend in principle.
• Check your credit, and deal with any issues early.
• Prepare your story: your experience, why you're buying, and what you'll bring to the business.
• Get the business's information early: lenders want detailed financials, so make access to them part of your letter of intent.
• Allow time: lender reviews can take several weeks, and longer for government-supported loans.

Common questions

Can I get a loan to buy an existing business in Canada?

Yes. Banks, credit unions and the Business Development Bank of Canada (BDC) lend to buyers of established businesses, based on the business's cash flow, its assets and your experience.

Does the Canada Small Business Financing Program cover buying a business?

It can help finance certain eligible costs, such as equipment, leasehold improvements and real property, and in some cases intangible assets and working capital, up to set limits. Ask a participating lender how it applies.

What is seller financing?

Seller (vendor) financing is when the seller lets you pay part of the price over time. Lenders often like it because it shows the seller believes in the business.

Next steps

Read how to buy a business in Canada for the full process, or see Sellvara's financing overview for buyers. When you've found a business, our guide to red flags when buying a business will help you check it before you commit.

This guide is general information, not legal, tax or financial advice. Every sale is different: talk to your own accountant and lawyer before you decide.