Franchise Finance Formula 102 : Why The Canada Small Business Financing Program Works And When It Doesn’t

What’s Good And Not So Good About Franchise Financing In Canada : Franchisee’s Are People Too !

OVERVIEW – Information on the positive and negative aspects of the Canada small business financing program as it relates to franchise loan solutions


The Canada small business financing program , properly approached, is a great vehicle to complete the financing of a franchise in Canada. Knowing the limitations of the program, and how to accentuate the benefits become a classic win/win. It's as close to a proven ' formula '

as we can get, so let's dig in.









While franchising is as close to ' rampant ' as we can get these days many franchisees still view the whole purchase/acquisition and of course financing with some fear and trepidation. It's essentially fear of the unknown we suppose.

While not specifically designed for the franchise industry the Canada small business financing program over the years has evolved into a major lender in Canadian franchising. The program, commonly called the govt SBL (small business loan) loan is government underwritten and sponsored, but administered and managed via our Canadian chartered banks and a very small number of misc other financial institutions.

It's not hard to see why banks flaunt their interest and expertise in franchise financing - as their loans are in a large portion guaranteed by the government. Who wouldn’t want a piece of that action?! While some franchising loans might be made by banks to the largest and well known brands (think ' clown and a golden arch) outside the SBL program they are clearly not the majority.

While the requisites for the program are certainly not onerous it is often what the program does not do that limits some franchisees from reaching financing success for their venture.

And those prerequisites? They include:

Reasonably clean personal credit and financial history of owner
Proof of acceptance from their chosen franchisor
Premises lease co-terminus with loan amortization
Business plan/cash flow and management bio

Surely everyone recognizes that that type of information is standard within any type of business financing in Canada.

So where do things go awry? As we said it's knowing when the program will not work from you.

Here's where the limitations of the program need to be clearly understood. They are as follows:

- The program is not 100% financing - the owner must have a reasonable down payment, aka ' equity component’

- The SBL loan is a term loan, not a cash loan, and not a revolving line of credit type facility - It is a term loan with equal fixed monthly payments, typically spread over a 3-7 year term that suits the borrowers

- The loan only finances equipment and leasehold improvements - That means franchise fees, working capital needs,

- The SBL does not finance inventories, and it doesnt provide financing for the actual sign up franchise fees

- The Loan cap is 350,000.00 so franchises requiring financing additional to that often become problematic when it comes to the SBL

If your franchise needs can’t be financed by a direct franchise commercial lender explore the Canada small business financing program. But beware, as we have noted, of what the program can... and can't do.

For further clarity and probably faster approval seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success in the franchise area of the Canada small business financing program.


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 10 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 :


7 Park Avenue Financial = Canadian Franchise Financing Expertise


Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?

CONTACT:

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

Direct Line = 416 319 5769
Office = 905 829 2653



Email = sprokop@7parkavenuefinancial.com

' Canadian Business Financing with the intelligent use of experience '

Stan Prokop

The Canada Small Business Financing Program : Exploding The Myths Of SBL Loans In Canada

What’s So Smart About Government SBL Small Business Loans

OVERVIEW – Information on SBL loans in Canada . Why is the Canada small business financing program loan ‘ smart’ financing for many business owners and entrepreneurs





Is the Canada Small Business Financing Program a smart way to finance your business? We think it is, if you understand what it is... and what it isn't! Let's dig in.

The SBL govt loan program in Canada is in some way a ' preferred' program when it comes to the SME sector. While some SME businesses in Canada can in fact be a fair size we would quickly point out that our first fact here is simply that the program is geared toward businesses that have actual or projected revenues under the 5 Million $ threshold .

It's a customized program that provides financing for a small handful of asset categories; those include equipment, leasehold improvements, technology equipment and application software, and even real estate. The typical mis-interpretation of the program is that it's a cash loan, a working capital loan, or a revolving line of credit. The answer is a categorical ' NO IT IS NOT ' to all 3 of those!

How does the program work? It could not be simpler. The SBL loan funds 90% of anything you buy in the approved asset categories, which of course mean that your ' down payment' or a better term ' equity component' is a minimum of 10 per cent. Careful attention in your business plan and financial projections needs to be made around ensuring your working capital and debt to equity ratios are considered reasonable.

While many business owners wish funds could be used for working capital and cash flow needs that simply is not the case. So if you're ' smart' on SBL loans you'll take some time to know what it covers relative to what can be financed.

Terms typically sought by our clients tend to be in the 5-7year range.

In the U.S. many institutions partner with the government on their version of this loan program. That isn’t the case here in Canada - the main partner is your local chartered bank. Your application and approval process will in fact be much quicker, and smoother when you've found a banker or Canadian business financing advisor that understands the program and knows how to ' fast track' you toward approval .

There are a couple other key advantages of the program - they include the pricing, which is very favorable relative to overall credit risk in the SME sector ( that includes start ups also by the way ) and is currently in the 3% over prime these days. With rates currently so low that’s a solid cost of funds.

Many franchises in Canada are well suited to the SBL govt loan program. We suspect it wasn’t intended for that, it’s simply turned out to be the case. Banks won’t finance 95% of all franchises directly, but are happy to do so under the auspices of the Govt Canada Small business financing program.

‘Will I have to guarantee the loan personally? ‘Is a key question asked by clients we meet in the SBL process? The answer is... partially, as only 25% of the loan will be under your personal covenant.

There are many myths around SBL loans:

Myth # 1- Do I have to work with or meet or present to the government
Answer - NO

Myth #2 - Is the process complicated
Answer - It will absolutely be complicated if you're not prepared. However if you have a business plan, reasonable personal credit history, a list of assets you need financed, and some other minor documentation you're off to the races !

So are SBL loans ' smart financing’. In the right circumstances, absolutely. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you navigate

Govt loan waters!


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 10 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 :

7 Park Avenue Financial = Candian SBL Canada Small Business Financing Govt Loan Expertise

Have A Question /Comment On Our Blog Or Canadian Business Financing Alternatives ?


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


Phone = 905 829 2653

Email = sprokop@7parkavenuefinancial.com

Stan Prokop