Subordinate Financing

BDC is a leading provider of subordinate financing in Canada; a strategic alternative for growing companies

What you need to know

Do you run a successful company but lack the collateral for a conventional loan?

BDC Subordinate Financing may be the right solution for you, if you're looking for a way to continue driving growth in your firm.

How does it work?

Think of subordinate financing as a hybrid of debt and equity financing.

In the simplest terms, it's like debt financing because you need cash flow to repay the loan, however, the terms of repayment are generally more flexible than conventional debt financing. Your repayment can be based on your available cash flow rather than your depreciating company assets.

Subordinate financing is often associated to equity financing because BDC may participate in your company's growth by receiving stock options and/or royalties, depending on the terms of your agreement with us.

What does "subordinate" mean?

The term "subordinate" refers to the fact that the debt ranks behind secured lenders.

This means that your chartered bank and long-term lenders, for example, will have a right to be repaid prior to us. In turn, that also means BDC assumes higher risk.

How much financing can you get?

The economic value of your business will determine the amount of subordinate financing you can get. Remember, your company's market position, your track record for success and your commitment are more important than your collateral.

How does BDC get a return on its investment?

Depending on the deal, BDC can achieve a return through fixed interest, much like in debt financing or through royalties or stock options, much like in equity financing. In the end, the expected yield depends on how well your company performs.

Example of a deal:

Example of a deal

How can I use subordinate financing?

Here are some typical scenarios:

Management buyouts Subordinate financing can provide the necessary funds for an existing management team to invest in a company and launch an MBO.
Mergers & Acquisitions Naturally involve both fixed assets and more difficult-to-finance intangible assets such as "goodwill." Subordinate financing can help companies purchase the goodwill while preserving their cash flow during a period where some uncertainty may exist.
Working capital for growth Subordinate financing is often used to finance working capital for growth, which enables companies to increase revenues and profits. Entrepreneurs looking to invest money in market penetration, improve product R&D or finance additional headcount can take advantage of subordinate financing without compromising their regular cash flow used for daily operations.

Why choose BDC?

  • BDC shares the risk with your company
  • Less costly than equity financing
  • In most cases, no shareholder agreement and no management rights
  • Pre-defined exit strategy
  • Customized to your specific needs
  • Limits the dilution of your company's capital
  • A strong dedicated team

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