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ARTICLE · 21 DECEMBER 2022

Vendor Financing: Considerations For Business Sellers

Siskinds LLP
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Following a year focused heavily on concerns surrounding inflation, last week the Bank of Canada made its seventh rate increase of 2022. After a period of cheap access to money...

CanadaFinance and Banking
Brendan Clouthier
Brendan Clouthier
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Following a year focused heavily on concerns surrounding inflation, last week the Bank of Canada made its seventh rate increase of 2022. After a period of cheap access to money fuelling robust M&A activity, some prospective buyers may be finding themselves in a more challenging position to finance a business purchase. These conditions may increase the appeal of, or need for, vendor financing.

Vendor financing (often called a "vendor take-back" or "VTB") involves delaying payment of some or all of the purchase price, as a debt repaid by the buyer to the vendor after closing and over an agreed period of time. It is available in both share and asset transactions. Often providing more flexibility than bank financing, the portion of the purchase price to be financed, applicable interest rate, and period for repayment are all subject to negotiation between the buyer and vendor. Payments could be made monthly, quarterly, annually, or at any other interval agreed by the

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