What’s The Cost And Return on Franchise Financing In Canada.? Franchising Loans & ROI Explained

What’s The Cost And Return on Franchise Financing In Canada.? Franchising Loans & ROI Explained


Information on franchise financing in Canada. How to factor the cost and return on investment of franchising finance loans into your business acquisition .



When we talk to clients about their concerns of getting franchise financing in Canada they also want to focus on whether the cost to finance that franchise is in effect a good ' return on investment ', in relation to both their own personal investment in the business as well as ongoing returns on that equity based on the ongoing profits of the business and the risk involved in this type of business, i.e. franchising!

The amount of capital you need to raise relative to your franchise loan varies in Canada. Factors that are critical here are the amount of capital that in some cases your franchisor might insist you put into the business. Another key factor is of course the amount of funding you are able to raise based upon your own personal financial situation, one factor of which is your personal credit rating. Clearly the majority of franchises in Canada are regarded as ' small business' so it makes sense that the banks and other firms that participate in franchise financing are focusing on you personally as well as your overall business prospects.

Canadian chartered banks, contrary to popular opinion, do participate in franchise financing in Canada. In fact in our opinion you could call them the major lender to the industry. But what many clients don’t understand when looking for franchise financing in Canada is that the bank lending in the franchising industry is done under the auspices of the Government Small Busines Loan, which is perfect suited to the type of financing you probably need.

So how much do franchises cost. We can safely say that they range in price for very nominal amounts such as 10k or so for a small service based franchise to millions of dollars for such large brand names... think ' golden arches' as an example .

Cost factors of your franchise vary with respect to how well your franchisor is doing in Canada, or perhaps it’s often the case of a franchisor in the U.S. who wishes to expand or introduce their presence in Canada.


We mentioned the government small business loan as a prime source of financing for the cost of your franchising proposal. This loan actually maxis out at $ 350,000.00 but in our experience that amount finances a huge amount of the franchise opportunities in Canada. They are great loans because they offer sensible maturities of 5-7 years, solid interest rates and nominal fees attached to the overall financing. The initial franchise fee itself is not financeable under the program, so typically our clients fund that portion themselves, which of course counts as their overall equity,


It's important to start sourcing your financing for your new franchise early on in the process. The bottom line, it’s never too late to start looking at your financing options available, including our aforementioned SBL loan.

So where does the capital come from relative to your own investment in the business.

Typically we see these funds coming from a clients own personal savings. That might also come from a severance situation based on the clients exit from ' corporate life ‘. In some cases you may choose to collapse savings, registered, or otherwise.

We encourage customers to understand the concept of financial leverage when it comes to R O I, or return on investment. Measure risk against reward; ensure you can withdraw a reasonable amount as a salary from the business, based on your financial projections.

And that ROI! Compute and analyze it just as you would any investment, such as a stock. Let’s say something costs 100% and you earn a 6% dividend. That’s generally a reasonable amount. So if you sell that investment 12 months latter your ROI is 6%. Think of that stock as being your business and the dividend being your business profits. Measure risk and reward and factor in the time and commitment you need to make into the business.

Franchising financing in Canada can be as difficult or easy as you make it. Speak to a trusted, credible and experienced Canadian business financing advisor who is expert in financing the cost of your franchising. And here's to your great, hopefully, Return on Investment!


ABOUT THE AUTHOR - STAN PROKOP

7 PARK AVENUE FINANCIAL

CANADIAN BUSINESS FINANCING



http://www.7parkavenuefinancial.com/franchise_financing_canada_finace_cost_franchising.html

Analyze This! What Exactly is “ Factoring” In Canada ? Business Financing Canada Options & Cost & How To!

Be your own ‘Analyst ‘ and challenge yourself to figure out the best type of a/r finance for your firm.

Information on factoring as a business financing Canada Option . What this financing costs and how it works.



It's hard enough to worry about business financing...Canada has numerous options - receivable financing... aka: “factoring" is one of them that Canadian business owners and financial managers keep hearing about. But, and its a big but, how does this type of financing work, what are the costs involved , and what type of factoring is the right one for my firm.

It kind of seems simple when you're first told about it... your company ' sells ' its receivables to a third party finance firm - you get cash ( the same day, by the way !).

The common questions asked by clients are very predicable to us - what is the collateral for the financing, how does it work, what does it cost, and perhaps most importantly, what is the key difference between this type of financing and a bank business loan.

The clearest way to explain factoring, (also often called ' invoice discounting 'and' receivable financing ' is that you should view your receivables as the essential collateral for financing of this type.

When you sell something you of course have agreed on a ' price ' with the buyer. In Canada the ' price ' of this sale is very predictable; it ranges between 1-3% per month. Your ability to have the receivable collected in a more timely fashion therefore reduces your cost of financing.

A good way to think of how this financing works is simply to think of it as a way to ' assign’ the rights you have in that A/R to the buyer, the finance firm.
Since you have received the funds for the sale immediately on invoicing your client the right to all the funds of course belongs to the buyer of your A/R.

So all of that is pretty basic, right? Where then are some of the... lets call them ' confusion points ' in factoring and business financing Canada A/R finance. A couple of key issues come immediately to mind - the finance firm holds back on each advance a certain portion of the funds - this is called the ' holdback'. If you are working with the right firm, and believe us there are some wrong ones! then the holdback will be refunded to you as soon as your client pays. The holdback you can typically expect to receive is in the 10 per cent range ... any more than that should be a strong negotiating point on the overall facility you set up.

Oh yes, what about the cost of the financing itself. Can that be negotiated? There are some quick ways to determine if you can negotiate better pricing on your facility. In factoring and A/R finance the cost often depends on a couple basics - the size of your monthly A/R, the general quality of your accounts receivable, and your own firm’s general financial condition.

The good news is that if your company is experiencing financial challenges of any sort you probably still quality for business financing Canada factoring. However, the better you are perceived as doing will often affect your ability to negotiate a better rate.

However you might perceive the cost of factoring, you need to always remember that the use of immediate fund allows you to grow your business - in other words you're finally not the bank for your clients, and that’s a good thing. S

So view factoring and its cost in the context of the tradeoff between growing and expanding your firm with benefits that exceed the cost of this type of financing. Naturally you can choose to simply self finance your firm, but why not grow your business y using external working capital financing generated by factoring. It's easier to obtain than bank financing, and can be viewed as a long term or a temporary strategy.

Speak to a trusted, credible and experienced Canadian business financing advisor who can steer you in the right direction on this valuable type of financing in Canada.


http://www.7parkavenuefinancial.com/factoring_business_financing_canada_cost.html

Pick The Best Canadian Receivables Factoring and Financing ! Cost and Rates Of Invoice Finance

We encountered a great term the other day when it comes to business financing - the term was ' expansionary finance ‘. Is it just us or does this term seem to perfectly cover off factoring and receivables financing.

Often though three key issues come up when Canadian business owners and financial managers consider this type of financing. What are those 3 issues ?They are the total cost of this type of financing, the rates associated with this facility, and probably most importantly what type of firm offers the best facility to match your company's own specific needs .

Let's learn and cover off those issues, which will allow you to get more comfortable we think with this type of Canadian business financing.

So, why should you even be considering receivables factoring? Simply because it has become a common way for Canadian business to cash flow their accounts receivable and generate working capital based on your own policy of extending credit terms to your customers.

And, as most business owners know, sales does not equal cash flow and when business financing of your A/R is not available from your bank a logical place to turn to is to an independent finance firm that offers invoice financing.

But, what does this type of financing cost, and who offers it, and an even better question... ‘How do you pick the best factoring partner?

In Canada the financing and factoring of A/R varies widely. As a general rule we can say the cost is between 1-3% per month based on the size of the facility, your overall financial condition, and most importantly, whether you have sought out and picked the finance firm that best suits your needs.

Let’s clarify our comment on your overall financial condition. Receivable financing places much less emphasis on your firms overall financial health - in fact a huge amount of Canadian firms that utilize this type of financing are in stages of turn around, high growth, experiencing temporary financial losses, etc . So don’t despair that your firm isn’t eligible. But, as we said, your client base, the size of your A/R portfolio on a monthly basis and some other factors will dictate your overall pricing.

Frankly the best costs in factoring finance in Canada start to be achieved when your monthly financing capability for A/R is greater than 250k. Is there a ceiling on the amount of facility? Absolutely not, and facilities that go into the several millions of dollars on a monthly basis happen everyday in Canada.

Clients often ask our favorite most recommended type of facility. That’s a simple one - its called C I D - which stands for confidential invoice discounting, allowing you to be in total control of billing and collecting your own a/r without any notification to clients that comes with the U.S. and U.K.versions of a/r finance .

Remember also that when you are addressing the always top of the list issue with firms such as yourself, ' Cost ' that you need to factor in things you might never have thought about. They include your ability to grow your business and generate more profits simply because you now have the capital to do so, albeit at a higher cost. And couldn’t you offset some of the cost of factoring by taking discounts with your own suppliers (and improving relations with them along the way!), as well as purchasing more effectively with your new found working capital?


So , in summary , if you need a financing partner when you are considering a receivable management and financing solution seek out and speak to a trusted, credible and experienced Canadian business financing advisor who will ensure your cost and partnership with your factoring firm is focused on a mutually beneficial relationship for financing success .




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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/factoring_receivables_invoice_rates_cost_financing.html

Worried About The Cost Of Business Accounts Receivable Factoring ? Problem Solved !

While many Canadian business owners and financial managers are accepting the significant benefits that come from business accounts receivable factoring what they continue to struggle with is the cost of this type of financing. Let's examine the proper method of looking at this cost of financing and ways to minimize the cost with the choice of an effective partner.

As a basic primer invoice financing is essentially the short term sale of your receivables, or ' AR’ that generates immediate cash flow and working capital for your company. Sounds good so far right? In certain cases it even eliminates all your credit and collections costs, although we must be frank and say that type of financing (turning over your credit decisions to another firm) isn’t our favorite, or recommended strategy. Clearly being able to obtain the benefits of this type of financing and being in total control of your own invoicing and collecting is the optimal solution.

The benefits of accounts receivable financing all come back to cash flow - business owners quickly realize that sales don’t equate to cash, and that can become an ongoing problem . Many entrepreneurs we meet advise they struggle with cash and working capital issues on a daily ( if not hourly !) basis, And given that they cannot obtain all, or the proper financing from their banks it seems logical that business accounts receivable financing is truly the only, and perhaps best, solution.

So, back to our main topic, which is understanding the cost of this type of financing! Canadian business needs to realize that if the lack of financing is stopping you from growing your business then the cost of new financing should probably not be your biggest worry.

Let's look at a real world type example. Take a look at your balance sheet. You probably have limited or minimal cash on hand and significant investment in receivables.

Let's use a firm with 1 million dollars in sales as an example. Lets assume you have some decent, or even great gross margins, or ' cost of sales '. Your overhead costs are fixed, and in control, and you are a profitable company. Since you haven’t any access to bank or traditional financing your net income is positive, but not growing.

If you can grow, or perhaps even double, your business by solving your cash flow problem then the business accounts receivable factoring cost is only associated with your additional growth that comes from accounts receivable financing .

Again, back to our example - your sales are 1 million, you have no financing, and factoring or invoice discounting will allow you to grow your sales to 2 million dollars. The cost of financing would probably be in the 40,000 to 50,000 dollar range - however, your overheads, or your fixed costs have stayed the same. Your profits, minus the factor cost can probably easily double.

Our example above focuses on the concept of opportunity cost, i.e. what you can do with capital by achieving more turnover and profits.

The actual financing cost of business accounts receivable factoring in Canada vary - they typically are between 1- 3% a month. 2% tends to be the norm. Better pricing can be achieved based on the size of your facility, the relative quality of your receivables, as well as the type of firm you deal with when you enter into a receivables financing arrangement. And don’t forget that confidential account receivable finance is also available in many cases - allowing you to totally control your customer base and cash flows.

Speak to a trusted, credible and experienced Canadian business financing advisor so you can truly understand the real cost, and the lost opportunity issues we have provided as an example. It may well be your ultimate cash flow revelations and solution!

-


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 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.7parkavenuefinancial.com/business_accounts_receivable_factoring_cost.html