Sellers Note in Canada

July 25, 2023

by a searcher from Ivey Business School at Western University in Toronto, ON, Canada

I haven't come across many people who've used a sellers note to finance their acquisition in Canada and for those who did, it was <10% of the purchase price. This seems to be different than in the US where I've heard it can be up to 30% of the sale. Does anyone have any thoughts on this in the Canadian market? Thank you!

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Reply by an intermediary
from McMaster University in Toronto, ON, Canada

In response to your query, seller financing in Canada can indeed seem less prevalent or substantial compared to the U.S., and this may be influenced by a variety of factors, including market dynamics, deal structures, and seller expectations. However, if you're exploring different financing options for acquisitions in Canada, you might want to consider the Canadian Digital Adoption Program (CDAP). It provides a 0% interest loan up to $100k, potentially serving as a useful supplement to traditional acquisition financing methods. Here's a link to more information: https://www.searchfunder.com/post/cdaps-100k-0-interest-loan-the-financial-windfall-for-your-business Just another avenue to consider as you navigate the Canadian market!

Reply by a searcher
from University of Engineering and Technology Lahore in Toronto, ON, Canada

Hi ^redacted‌ We closed 1 deal on 100% sellers note and other one 95% sellers note. %age of sellers note in a deal mainly depends on various factors for e.g. the motivation of the seller, buyer's relationship and trust level with seller and structure of the deal etc. We were able to show the seller that they will end up having a lot more cash in long run as compare to upfront cash and it also de-risk the deal for us since seller still stay involved in the business. 10 to 30% sellers note is common in a cash upfront deals and lenders also acknowledge it as long as sellers note is subordinate to senior lender.

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