A lender is not evaluating your enthusiasm for the deal. It is evaluating one file. Here is what belongs in it, and why leaving one item out costs you weeks, not days.
Key takeaways
STEP 01 OF 10
Financial diligence goes first, for a practical reason: “if the underlying numbers do not hold up, there is little reason to spend time and legal fees on the operational and legal review that follows” — deavo's own framing of buyer-side diligence at its due-diligence checklist. A lender's own process runs the same way. Build the financial section first, complete it, and only then invest in the corporate-records and contract review a lawyer typically runs in parallel once a letter of intent is signed.
STEP 02 OF 10
The baseline package: two to three years of the target's historical financial statements plus a current-year interim statement, tax and GST/HST filings reconciled against those statements, and a normalized earnings summary — seller's discretionary earnings or EBITDA, depending on deal size — with every add-back explained rather than asserted. Aggressive or unsupported add-backs are, in deavo's words, “one of the more common points of pushback during due diligence,” and a lender will apply exactly the same scrutiny a buyer should.
Treat conversion between an SDE-based figure and an EBITDA-based figure as directional only, not a precise translation — the two earnings bases are calculated differently, and there is no fixed revenue threshold at which a lender switches from one to the other. If your own model quietly converts between the two somewhere in the package, say so, or a lender doing its own math will reach a different number than yours and question the whole file over the discrepancy rather than just the one figure.
STEP 03 OF 10
Accounts receivable and payable aging schedules tell a lender how collectible the working capital actually is, not just what the balance sheet claims. Pair that with a list of outstanding loans, leases or liens registered against the target's assets — a lender financing an asset purchase will run its own pre-closing search regardless, but arriving with the answer already documented shortens the file's path through underwriting.
STEP 04 OF 10
The Income Tax Act obliges a business to keep its books, records and supporting vouchers only “until the expiration of six years from the end of the last taxation year to which the records and books of account relate” — read the rule at ITA s.230. Where no return was filed for a year, the six-year clock runs instead from the day the return is eventually filed. A lender's own credit policy may ask for a longer look-back than the target is legally obliged to have kept — surface that gap early, rather than letting it surface as a missing item during underwriting.
STEP 05 OF 10
A lender secures a share purchase differently from an asset purchase, and the package should say plainly which one this is. On a share deal, expect “a pledge of the target's shares, plus a guarantee and security from the target company itself,” with the target guaranteeing debt it never directly received. On an asset deal, expect “PPSA registration directly against the purchased assets — equipment, inventory, receivables — as identifiable collateral,” with narrower diligence focused on title and condition of those specific assets. See how lenders finance share vs asset purchases, and see choosing between a share deal and an asset deal for the rest of that decision.
A pre-closing PPSA search belongs in the package either way — on an asset deal to confirm clear title to what is actually being purchased, and on a share deal to confirm the target's own balance sheet is not already carrying registered security a new lender would otherwise be surprised by after closing. Order the search early; a registration you did not expect is far cheaper to resolve before the file reaches underwriting than after a closing date is already fixed.
STEP 06 OF 10
If part of the financing is meant to run through the Canada Small Business Financing Program, confirm the asset categories and the $1,000,000/$500,000/$150,000 sub-caps before it goes into the package — a share purchase cannot use CSBFP dollars at all. See applying for CSBFP funding on a business purchase for the eligible-asset test in full.
STEP 07 OF 10
A lender's underwriting on an acquisition covers “the buyer's personal financial position” alongside “the target business's financial statements, and often a business valuation or appraisal the lender commissions independently” — deavo's summary at bank loan vs vendor financing. A file built only around the target's numbers, with nothing on the buyer's own financial position and any guarantor's capacity, is an incomplete package regardless of how strong the target's financials look.
STEP 08 OF 10
Price, closing date, any purchase-price adjustment mechanism, and how much of the price is buyer equity versus seller financing versus the loan being requested all belong in the package alongside the financials — a lender reading a request in isolation, without the rest of the capital stack, cannot properly size its own piece of it. See assembling the capital stack for a Canadian acquisition for how the layers are meant to be presented together.
STEP 09 OF 10
A business whose value sits mostly in goodwill rather than identifiable assets is genuinely harder to finance conventionally — a factor deavo flags directly when comparing trades businesses, which “carry real equipment and vehicles as identifiable assets” and are consequently “often somewhat easier to finance” than goodwill-heavy service businesses. Do not understate this in the package; a lender will find it in the balance sheet regardless, and a package that names the issue upfront reads as more credible than one that leaves the lender to discover it.
STEP 10 OF 10
The core file — historical financials, normalized earnings, AR/AP aging, liens, deal structure and terms, buyer capacity — does not change between a conventional bank, a CSBFP-participating lender, and BDC. Assemble it once, and adapt only the cover summary and any programme-specific eligibility section for each lender you approach, rather than rebuilding the file from scratch for each conversation.
Leading with the deal story instead of the numbers. A lender wants the financial section first. An enthusiastic narrative about the opportunity does not substitute for two to three years of reconciled financials and a defensible earnings summary.
Assuming the target's own records go back further than the law requires. The Income Tax Act only obliges six years of retained records. A package that assumes a decade of history exists can stall on a request the seller simply cannot fill.
Building one generic security section for both share and asset structures. A share purchase needs a share pledge and a target guarantee; an asset purchase needs PPSA registration against specific collateral. Write the security section for the actual structure, not a template that assumes one.
Leaving unsupported add-backs in the normalized earnings figure. An add-back a lender cannot verify is treated as a red flag, not a benefit of the doubt. Document the basis for every adjustment before it goes in the package.
To illustrate the difference the deal structure makes to the security section — the figures are a drafting choice for this example, not a benchmark.
Scenario A. A buyer is acquiring a business valued at $1,800,000 as an asset purchase. The lender's security package: a PPSA registration against the purchased equipment, inventory and receivables named in the purchase agreement, plus a pre-closing PPSA search confirming no existing liens survive the closing. Diligence on the target's broader corporate history — old litigation, undisclosed contingent liabilities — is narrower, because those risks do not attach to the specific assets being purchased.
Scenario B. The same buyer instead structures the purchase as a share deal, at the same $1,800,000 price. The security package changes materially: a pledge of the target's shares, a guarantee from the target corporation itself even though the loan proceeds never touch its own accounts, and meaningfully broader diligence — because the buyer, and by extension the lender's collateral, now inherits the target's full corporate history, not just its named assets.
The price did not change between the two scenarios. The file the lender needs, and what it is prepared to lend against, changed because the structure did.
The core financial package is the same everywhere; what each lender adds on top differs.
Build the core package once; adapt the cover section to whichever lender you are approaching.
Two to three years plus a current-year interim statement is the standard baseline lenders and careful buyers both use. Confirm your specific lender's own look-back requirement early, since it can exceed what the Income Tax Act obliges the seller to have retained.
The eligible-asset test changes what the CSBFP portion can secure, but the underlying share-vs-asset distinction in how a lender takes security still applies on top of it — CSBFP does not replace the lender's own security process.
Yes. A lender underwrites the buyer's repayment capacity alongside the target's financials, particularly where a personal guarantee is expected — a package missing that section is incomplete regardless of how the target's numbers look.
Only if you convert it and label the conversion as directional, not exact — the two bases are built differently, and a lender that recalculates the figure independently and gets a different answer will question the whole package over the gap, not just that one line.
A short call can catch the gap that costs you weeks in underwriting.
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