Few buyers write a single cheque. Most acquisitions are funded from a stack: senior debt, a vendor take-back, sometimes an earn-out, and the buyer's own equity. We help you design the stack, then introduce independent lenders.
Xito Capital Partners is a financing advisory firm. We do not lend. Financing is provided by independent lenders and is subject to their approval and terms; approval is not guaranteed.
Each layer has a different cost, risk and owner. The work is in how they fit together.
| Layer | What it is | Role in the deal | What the other side focuses on |
|---|---|---|---|
| Senior debt | A term loan or cash-flow or asset-based facility from a bank or alternative lender. | Usually the largest layer, secured, with the first claim on the business. | Normalized EBITDA, debt service coverage, collateral and the buyer's experience. |
| Vendor take-back (VTB) | The seller finances part of the price through a promissory note. | Bridges valuation gaps and shows seller confidence. Usually subordinated to senior debt. | Interest rate, term, security, subordination and standstill terms, and set-off rights. |
| Earn-out | Part of the price paid only if the business hits agreed targets. | Shares risk when buyer and seller disagree on the forecast. | How the metric is defined, the measurement period, who controls the business, and dispute resolution. |
| Mezzanine capital | Subordinated debt or preferred equity that sits between senior debt and equity. | Fills the gap when senior debt and equity are not enough. | Cost, warrants or equity features, and covenants. |
| Buyer equity | Cash the buyer and any investors put in. | Lenders expect it. More equity means less debt to service. | Source of funds, guarantees and alignment. |
Swipe sideways to see all columns.
A VTB is the seller agreeing to be paid part of the price over time. It is one of the most common ways to close a valuation gap in a Canadian private-company deal.
A VTB can help a seller reach the headline price, signals confidence in the business after closing, and may allow the proceeds to be taxed over time instead of all at once. Sellers should take their own tax advice.
A promissory note from the buyer, ranking behind the senior lender and governed by a subordination and standstill agreement. Key terms: interest rate, term, security, payment triggers, and whether the buyer can set off indemnity claims against payments.
No set-off right, unclear subordination, a senior lender that blocks payments when covenants are tight, a balloon payment the business cannot refinance, and personal guarantees nobody modelled.
The strongest financing conversations start with a deal that has already been stress-tested.
Build sources and uses, test debt service coverage and run downside cases before you make an offer.
Turn the QoE findings and your own financials into a lender-ready package that tells the story clearly.
Introduce independent lenders, compare term sheets and align the VTB and senior terms before the purchase agreement is signed.
Buy-Side AdvisoryLarger Deals ($2M+)Borrowing Capacity Calculator
Whether you are an owner buying a competitor, a searcher acquiring your first business, or a management team buying out the owner, lenders and sellers will ask the same question: can the business carry this debt?
We model that question with you first, so the offer you make is one the funding stack can support.
Start an Acquisition Financing ReviewNo. Xito Capital Partners is a financing advisory firm. We structure the funding with you and introduce independent lenders. Financing is provided by those lenders, is subject to their approval and terms, and approval is not guaranteed.
A VTB is a loan from the seller to the buyer for part of the purchase price, documented as a promissory note and repaid over time. It is commonly used to bridge a valuation gap and usually ranks behind the senior lender.
Lenders size debt against the target's normalized cash flow and available collateral, usually testing that earnings cover debt payments with a margin of safety (a debt service coverage ratio of about 1.25x or higher is a common benchmark). Your equity contribution and experience also matter. We model this before you make an offer.
Rarely. Sellers generally want meaningful cash at closing, so a VTB usually funds a portion of the price alongside senior debt and your own equity.
Not always, but lenders underwrite to normalized cash flow, and an independent review or a Pre-QoE Deal Risk Scan gives them numbers they can rely on. It can shorten underwriting. See buy-side QoE.
At the LOI stage, not after the purchase agreement is drafted. Lender requirements shape the price, the VTB terms and the closing conditions, so the earlier they are in the conversation, the fewer surprises.
Our partner-led mandates start at $2M. For smaller acquisitions, begin with the Buyer's Acquisition Pack. Tell us about the deal and we will say honestly whether we can help.
Yes. All submissions are covered by our Mutual NDA and handled under strict confidentiality protocols. See our Privacy Policy. Confidentiality matters even more on the buy side, where early disclosure of your interest can change how a seller or their employees behave.
Xito Capital Partners is an advisory firm. We are not a law firm, an accounting firm or a lender, and nothing on this page is legal, tax or accounting advice. Have a qualified lawyer and accountant in your province review any agreement or structure before you rely on it. Quality of Earnings and Deal Risk Scan work is financial diligence analysis, not an audit, review engagement or assurance opinion.
Share the deal and a managing partner will reply within one business day. Looking for working capital rather than acquisition funding? See business financing.
Prefer to talk first? Call our Calgary desk directly.
403-827-1014
Buying something under $2M? The Buyer's Acquisition Pack and the Pre-QoE Deal Risk Scan are usually the better fit, and you can start either one today.
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