Buying a business with no money down is one of the hardest ways to acquire a business. However, it is possible to buy a business in Canada with no (or little) money down, under the right circumstances. Ideally, when you are considering becoming a business owner in Canada, you have the option of buying an existing business or starting a new one. The option you choose will affect how you will account for the purchase of the business assets for income tax purposes.

When you buy a business, you generally pay a set amount for the entire business. In some cases, the sale agreement sets out a price for each asset, a value for the inventory of the business and, if applicable, an amount that can reasonably be attributed to goodwill. Also, buying a business in Canada can be an efficient way to quickly grow your client base, increase your capacity or gain access to new markets. You can even acquire a competitor’s or supplier’s business.

Buying a business that already exists can bring numerous advantages: the product or service that the business sells is already positioned in the market, the staff are trained, and the supplier network and distribution channels are established. However, if you are buying a business that is doing poorly, you need to know the reasons for that and carefully consider if you have what it takes to turn things around.

Businesses on sale in Canada are generally advertised with commercial real estate agents, brokers and in the print media, but you may leverage your personal or business network to search for a new acquisition. If you buy an existing business, most of the time, it will be either a franchise or an independent business.

Note that entrepreneurs who want to buy a business with “no money down” tend to be viewed with caution by business brokers in Canada. This is because a good number of these entrepreneurs have unrealistic expectations. These expectations come from having little actual knowledge.

To be taken seriously, you are expected to be prepared. Have realistic expectations and be knowledgeable. Do your due diligence. Show owners, brokers, and potential investors that you have done your homework.

Reasons Why an Entrepreneur Can’t or Won’t Put Money Down

Generally, there are four major reasons why business buyers can’t or won’t put money down for a business purchase. They include;

  1. Bad Credit

According to reports, the most common reason potential buyers tend not to put money down is bad credit. The potential buyer simply has no money to put down and no credit to borrow against. Indeed this can be one of the most challenging situations for an individual. However, buying a business with bad credit is possible. It is just very hard.

  1. Money Tied in Investments

Another common reason is that the potential buyer has the money tied in investments. They want to keep their investments intact and don’t want to leverage them. Meanwhile, some potential buyers have illiquid investments that can’t be easily leveraged.

An example of this type of investment is owning another business (e.g., a service business with few assets). Others have liquid investments that can easily be leveraged or converted to cash, such as stocks, bonds, mutual funds, and real estate. Howbeit, converting the assets to cash may lead to a major taxable event.

  1. Low on Money

Also, note that some potential buyers don’t have savings or any money to invest. Their credit may be decent, but they just don’t have the funds to buy the business or make a down payment.

  1. Don’t Want to Risk Your Own Money

Some investors may have money – but don’t want to risk it. Instead, they prefer to use “other people’s money.” However, it is likely to generate skepticism among business brokers and potential sellers.

Financing Options to Buy a Business in Canada Without Your Own Money

Note that getting a no-money-down transaction is usually very challenging. Successful transactions of this type tend to be few and far between. However, there are ways to finance a business acquisition in Canada with no money down, including the following:

  1. 100% Seller Financing

Just as the name states, seller financing is provided by the person that is selling the business. The seller offers financing by creating a note that is payable within a certain number of years. Note that having a seller financing component is more or less a good idea for most acquisitions.

They keep the seller indirectly tied to the business because buyers will usually make the payments using the cash flow of the new business. Nonetheless, few, if any sellers, are ever willing to finance 100%. They often demand that the buyer contribute funds as a payment.

  1. Factoring Invoices

One of the greatest challenges of working with commercial clients is that they pay invoices in 30 to 60 days. It is unlikely that your newly acquired company can wait that long for payment. Indeed the company requires funds to pay employees, suppliers, and other expenses.

It can’t afford to have its funds tied to slow-paying invoices. Howbeit, the solution is to use accounts receivable factoring. This option allows you to finance your accounts receivable (invoices). It provides immediate funds you can use to cover business expenses and grow.

  1. SBA Financing

Small Business Administration financing is an option that every small business buyer should consider. The SBA backs institutions that offer financing to individuals small companies. SBA programs are designed to help individuals and small business owners. Programs range from Microloans (under $50,000) to conventional loans of up to $5,000,000.

  1. Microloan

If you did not use SBA-backed financing to buy the business, you may still use it to operate the business. This is a great option for small companies. If you need less than $50,000 in financing, consider an SBA Microloan. They are easier to get than conventional SBA-backed loans and can be used to improve your cash flow.

  1. Friends and Family

First and foremost, it is not advisable for business buyers to get funds from friends and family. The easiest way to derail a relationship with a friend or family member is to ask for money. If you choose to use friends and family, ask for the least amount possible. Combine it with seller financing and use friends and family to cover only the down payment. Also, do your best to repay them quickly. Basic rules for borrowing from friends and family include;

  1. Make a formal pitch that explains why it is a good idea to invest in your business, what problem you’re solving, and your mission.
  2. Provide a business plan, projecting how much you expect to make in sales based on market research. Earn their confidence by showing them how you can repay them.
  3. Make them understand the risks involved in investing in your business and how you plan to manage repaying them if things don’t go as planned.
  4. Sign a formal agreement that speaks about the rate and schedule of repayment, and if they get a share in the business for their investment.
  5. Provide regular updates on what you’re doing with their money, and how the business is developing.
  1. Equipment Leasing

If you need equipment but cannot afford to buy it, consider leasing it. Note that a lease allows you to get tools and equipment without the requirements of getting a loan. Leases can also be structured so that you purchase the equipment at the end of the lease for a token amount.

  1. Leveraged Buyouts

Another way to finance a business with no money down is to do a small business leveraged buyout. In a leveraged buyout, you use the assets of the business (plus other funds) to finance the purchase. A leveraged buyout can be structured as a “no-money-down transaction” if one condition is met. The business is expected to be sold for a price lower than the value of its assets. These can be opportunities, but they are very hard to find.


There are a lot of individuals who have bought a small business without any money in Canada and have made them successful. Raising money is a new and uncertain experience for early-stage entrepreneurs. This guide is your gateway to the vast expanse of business finance.

It is imperative that you do your own research, consider the pros and cons of various options, and seek professional advice at the right time. When buying a business, you want to consider whether you are buying just assets or the whole business which includes both assets and liabilities (debt).