Franchise Financing In Canada
Information on franchise loans in Canada . When it comes to franchisee financing and lending the applicant needs to identify key requirements of franchising loans.
Franchise loans in Canada. Is the financing for a franchisee opportunity really any different than any other type of business lending / loan? The answer is no... And yes ... so let's spend a bit of time defining those differences!
It's very safe to say that franchising is a sought after business model in Canada... all the reasons are obvious - proven business strategies, demonstrable examples of your success from existing franchisees, etc.
So the immediate problem then becomes: Where do I get the cash and financing to complete a successful transaction. Here's where your financial search begins, and as we noted, there are some strong similarities in what you need for any business loan - some of them being a business plan and reasonable financial projections.
Although the majority of business financing in Canada requires personal guarantees from the owners as a back up plan for your lender there are in fact ways to limit your personal guarantee when it comes to financing a franchise . One of the best options in that area is to consider a BIL/CSBF loan, which is a federally sponsored program that significantly limits your personal guarantee to 25%. Now that's good news for the prospective franchisee.
You can of course explore financing options with your franchisor - we very quickly point out to clients they should expect some solid advice from the franchisor as to how things might work, but certainly don't expect direct financing in the form of a loan, etc. That’s your job!
Are there some potential franchisees who actually expect they can get 100% franchising for their proposed new business? Unfortunately there are, and even more unfortunately they are wrong. You do need a personal equity component to your overall finance strategy. What amount is that? We can safely say is a minimum of 10% permanent equity, but you should be able to demonstrate access to other working capital sources that will at a minimum be able to help you get out of the gate until your revenue expectations are starting to be met .
So where in fact do franchise loans and financing for your new business come from in Canada. In reality it's a small handful of sources. Oh and by the way, we never recommend to clients that they entirely pay cash for their new business, as you do no want to put all your financials resources at risk in the even of a business failure or downturn. And by the way, That’s just another great reason ensure you are incorporated.
Lending for franchises in Canada comes from a small handful of specialized finance firms, although the majority of franchises under 350,000.00$ are in fact financed by the government small business loan. Financing can also be accomplished by cobbling together those two solutions with equipment financing and other forms of alternative working capital from non bank lenders.
Collateral. Is it required from a franchisee for franchise loans? In general, we can say it is not. Although your overall credit history and personal net worth are factors in franchise lending, or any lending for that matter, a properly structured franchise loan will in fact not require collateralization of personal assets ... and that's a good thing!
Your overall business experience and personal demeanor in your franchise loan presentation is key to a good financing package. Lenders look for people that have business and marketing savvy and who come across as positive and successful.
We identified in our title today 4 components of a successful finance lending strategy. In case you have missed them we've purposely kept them subtle, but in fact they are character, capacity, and collateral and credit history. Those by the way are components of any successful business financing, so as we said at the outset, while there are some nuances in franchise lending common sense business applies also!
Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you to ensure lending for your franchisee dream is met with success.
CANADIAN FRANCHISE FINANCE EXPERTISE
Stan Prokop - founder of 7 Park Avenue Financial –
http://www.7parkavenuefinancial.com
Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details :
http://www.7parkavenuefinancial.com/franchising_loans_financing_lending.html
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