How To Get Franchise Financing In Canada

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How To Finance A Franchise In Canada

 

 

Financing a franchise and the purchase of that business is no doubt on of the larger decisions in the entrepreneurs life. It is safe to say that when we meet potential franchisees at 7 Park Avenue Financial they want some solid options on funding and financing their new business.

Franchise loans in Canada to some extent are limited vis a vis who finances these businesses - it is therefore important to know who the players are and what lending options are available from franchise lenders.

Business people can be forgiven when they seem skeptical around whether franchises can be easily financed in the current business environment . After the 2008-2009 worldwide recession business loans of all type in many ways became more difficult to access. The bottom line though is that funding is still available, and the lending criteria and solutions are not as demanding as they might think.

No business loan is a cake walk - therefore the preparation in the franchise loan process is key to ultimate financing success.

 

How Does Franchise Financing Work ?

The way we like to look at the ' being prepared ' process is essentially in two key categories - having a strong proposal and ensuring you can meet the basic qualifications for the franchise loan . And by the way, that also means being able to prove you have some solid business experience. Keeping up your part of the bargain is also key ! What is that?

It's your equity investment of down payment into the business, the balance coming from your franchise finance loan funding. Suffice to say that there is typically no 100% financing in this area of Canadian business.

One key aspect of franchise risk is that fact that it is probably actually more easy to secure business franchise funding than any other normal start up since you have the benefit of a ' brand ' and ' reputation' backing you .. I.e. the Franchisor.

When it comes to your ' deposit ' or equity position in the loan these funds typically come from various parts of your 'net worth '. While you may think that you have to tap into major savings or home equity, or collapse RRSP's, the reality is that you need to come up with anywhere from 20-40% , generally speaking , of your desired loan amount.

Personal credit history is also a key aspect of the franchise loan .Unfortunately, and we run into this almost all the time, many franchisees don’t have a sense of how the franchise funding lenders assess their personal credit history. It's more simply than you think. The entire personal credit history of everyone in Canada comes down to a numerical score at the credit bureau. Borrowers can easily check their credit scores with a local credit bureau, and by the way the 'magic score ' in most business loans is 650. Poor credit histories make it close to impossible to achieve almost any type of business loan, including franchise loans.

Next steps generally revolve around assessing your financing options. For some of the larger franchise chains one or two well known independent finance companies can handle all your franchising needs from a lending / loan viewpoint. But, here’s the kicker, the majority of franchises in Canada are funded by the Government Small Business Loan program .

Key benefits of the loan include:

Flexible rates

Terms of 2-5 years

Attractive structures including some pre payment and interest only options,

Low personal guarantees - typically 10% of the loan

Naturally you want to expedite your transaction. That is done by ensuring you have a crisp business plan and financial forecast in place - highlighting your business experiences, profit and cash flow potential, and info on the success of your franchisor as your new partner in Canadian business. You simply want to focus on one thing, showing your ability to repay the franchise loan.

Supplemental financing can also be achieved quite creatively if you have the right assistance - that might come in the form of a merchant advance loan against future sales, equipment leasing, or a straight unsecured working capital term loan.

Franchise Finance Options In Canada

So the good news is you have some great options in franchise finance and financing your new business. It’s up to you to assess those options, be prepared to present your plan. Want some great assistance? Seek out and speak to a trusted credible and experienced Canadian business financing advisor with a track record of business finance success in franchise finance funding.


7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com


Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.


Stan Prokop