Navigating Business Acquisition Loans and Lending in Your Journey to Entrepreneurship

ROUNDTABLE RECAP!

Village Wellth Roundtables are hosted monthly with a guest speaker on a specific topic or an acquisition entrepreneur sharing their story. If you are a subscribing member, please join us monthly!

Last month’s special guest was Andrew Stordeur, the new owner of All Things Cedar, in Lethbridge AB.

Introduction

In the world of entrepreneurship, there is no one-size-fits-all approach to success. Andrew Stordeur's story is a testament to this diversity. A husband and father of four, he didn't initially realize that acquiring an existing business could be a viable alternative to the traditional corporate path. Soon after learning about Acquisition Entrepreneurship the pursuit was on! Andrew recently joined us for one of our private Roundtable events. In this blog, we'll share some of Andrew's acquisition story, and focus on the role of business acquisition loans in his entrepreneurial pursuit.

Acquiring an Existing Business: A Paradigm Shift

Andrew's path to entrepreneurship took an unexpected turn when he discovered that acquiring an existing business was a viable alternative to starting from scratch. It was a revelation that altered his perspective on career choices and business ownership. He dove into devouring content on the topic and surrounding himself with people who had done similar things or work in the space. Andrew found Village Wellth shortly after the start of his acquisition journey and started connecting with other members to learn more.

The Role of Lending in the Acquisition Strategy

Acquiring an existing business is a multi-faceted process that often requires substantial financial resources. To navigate this journey successfully, Andrew emphasized the importance of considering both equity partners and lending options when structuring a deal. In particular, he highlighted the importance of knowing how much equity you want to hold, “do you want to be a majority or minority shareholder? You have to know what you want.”

Cash Flow Lending and Business Acquisition

There were key attributes Andrew looked for in a business deal, such as recurring revenue, margins, and digital transformation opportunities. He shared the importance of refining the initial deal structure and terms to align with your goals. By structuring loan terms with the lender that allow for the protection of the business's cash flow in the first year there is flexibility should there be transition hiccups, post-close. If you can get an interest only period from the lender it provides for time to course correct in the event of unforeseen circumstances.

Acquiring a Business Post COVID-19

The COVID-19 pandemic brought unique challenges to the acquisition process. Andrew highlighted the importance of understanding the business's pre-pandemic health and having a clear vision of where it could go. Get a good understanding of what happened during Covid and what the current realistic “norm” is.

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Adjustments to Valuation

Andrew detailed how changes to the capital stack and valuation were made during due diligence. Flexibility and adaptability are key in navigating due diligence and negotiations. Knowing when to bring up an issue and knowing what you can live with are important to differentiate between.

Choosing the Right Lender

Selecting the right lender was critical. Having a clear Letter of Intent (LOI) in place before building relationships with lenders was his advice. Transparency throughout the process can build trust with lenders and help ensure the deal's success. Building strong relationships with bankers is particularly important in cash flow lending, as they can offer valuable support and guidance, while they need to get to know your background. In small business acquisitions, they’re betting on you as the operator and approval relies heavily on your experience in relation to the business you’re buying.

By embracing alternative routes, understanding the intricacies of deal structure, and building strong relationships, aspiring entrepreneurs can find success in the acquisition of existing businesses. Each story is unique, and with the right approach, anyone can navigate their way to entrepreneurship. This is what we do. Learn more about Acquirewell by Village Wellth.