Canadian Franchisee Financing & Getting The Right Finance For A Franchise - Possible In Today’s Economy? Here’s how!

In The Minutes It Takes to Read This You’ll Understand Franchisee Funding & Loans In Canada


Is financing or the lack of knowledge of who to turn to holding you back on completing your dream or vision of finance for a franchise you have chosen? The ' how to ' in franchisee financing in Canada is not as hard as you might think. Let's examine a solid ' battle plan ' and the ' lay of the land ' in franchisee finance with respect to opportunities in the Canadian franchise industry.

The amount of capital you need when you consider how to finance a franchise can often seem formidable. The amount you are able to finance will come from debt (your loan) and your own individual equity into the business... classically known as your ' down payment '. We quite frankly can’t remember when we have not heard the question from any client ' how much do I have to put in ‘. More about that one later.

We caution clients also to think of the financing over the intermediate and long term. By that we mean that yes, you have to have solid funding to acquire the franchise but at the same time start to think also of how any working capital needs might be solved after you have acquired the business .

But first things first, right? So back to our main point today, which is ‘In today’s tough business climate?
Is it still possible to attain the amount of franchisee financing you need?’ We hate to put on our lawyers hat and offer up the answer ' it depends ' but quite frankly we're fairly bullish on the ability for any Canadian business entrepreneur to acquire financing for a franchise.

The key elements of ' successful ' franchisee financing revolving around a small handful of key elements - they are as follows - a reasonable down payment aka ' equity investment ' by yourself as owner. Secondly, the financing must be well documented - this should be a bus. Plan or summary highlighting you yourself, your proposed acquisition, info on the franchisor, industry stats, and a financial plan that makes sense. Only one financial plan makes sense for your lender - the one that shows them how they will be repaid!

The business plan or a significant executive summary outlining what we have just discussed should not be a daunting task. While we recognize that many clients don’t have the experience, tools, (or simply the desire) to prepare such a document it in fact can be prepared efficiently and for a very low/reasonable cost... we would not recommend paying more than 1k or less for a plan that meets and exceeds expectations. Also, be prepared to provide some input into the plan, as no one should know the business and it’s potential more than you.

In Canada franchises in the 350-400k range are financing via 4 main methods. Thousands of businesses utilize the well known BIL/CSBF loan that quite frankly provides, in our opinion, the best rates, terms and structures for small to medium sized franchisees.

Additional financing comes from one or two specialty firms that tend to work only with established larger franchisors with requirements often approaching 1 Million or more per transaction. Also, is it possible just to get ' a loan ' from a Canadian bank to acquire the franchise? We would offer up that it is, if you have significant collateral to pledge, very strong net worth, and a pristine credit bureau record. We don’t see that type of transaction happening a lot, and certainly the idea of collapsing or collateralizing outside investments has all sorts of personal and financial implications.

Your ability to finance any hard assets via equpment financing can often nicely complement or round out a financing package. Again, it’s a case of making the numbers work and ensuring that you have taken some time to analyze the total financing picture. When we sit down with clients we tend to break down the financing into key areas such as ' soft costs ‘(for example your franchisee fee) equipment, leaseholds, and working capital. By identifying a source for all these you have the ability to cobble together a plan that works.

Bottom line, it’s very possible to get a solid franchisee financing package in place to complete your dream acquisition. Common sense attributes such as being prepared and doing your homework go a long way. Consider also talking tow or working with a trusted, credible and experienced Canadian business financing advisor who can help you navigate the franchise finance roadmap to entrepreneurial 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 80 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

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

Financing a franchise business? What you need to know to obtain finance for a franchise

Can too much expert knowledge in financing a franchise business ever be a bad thing? We certainly don’t think so and we'll show you how to obtain finance for a franchise business that you have chosen to purchase.

When talking to clients about franchise finance in Canada we generally talk about the Boy Scout motto. You will recall that their motto is ' BE PREPARED ' and that’s the total strategy around financing a franchise successful that you must adopt.

Getting the money to purchase your franchise of often the biggest worry of new entrepreneurs such as yourself. People search out franchising opportunities because they are essentially looking for a combination of opportunity and wealth - there is usually only one major obstacle to that road to success, it’s the funding for the acquisition of the franchise business.

If we had to summarize in a very simple and basic what you need to be successful in franchise financing we would boil it down to a few key issues. Want to know what they are? From our perspective it all comes down to a reasonable history of business or management experience , a decent personal financial profile - more about that one later, and access to the ' inside secret ' of franchise financing in Canada, which, you may be surprise to know, is the government of Canada !

Let’s circle back on those points - and as always it comes down and back to our Boy Scout motto - be prepared. We can see our client’s eyes rolling back now when we tell them we need a crisp business plan . That’s a key requirement of your ability to obtain finance for a franchise, simply because it’s the ' proof’, if you will, of your ability to understand and run your business properly. In that document you have info about yourself, the business you are purchasing, the industry you are in, and the financial performance you expect to achieve in your new role as business owner and entrepreneur.

From a lenders perspective financing a franchise business is all about one thing - getting paid back for the loan. So the lender will look at how you have structured the financial portion of your business plan to reflect ability to repay your franchise loan, as well as how much cash flow and working capital is left to pay yourself a salary and run your new business. Could anything make more sense than a properly crafted and positioned business plan - we don’t think so.

Your money - you have it, you want to keep it - don’t we all. However, whether it’s a franchise business or any business for that matter OPM never works - OPM is ' other people’s money' and you can't rely on 100% of outside financing to obtain finance for a franchise in Canada. So be prepared to invest anywhere from 25-50% of the purchase price into your acquisition. Coupled with that and this is critical, you must be able to demonstrate that you have run your personal and business affairs respectably from a credit perspective. Obtaining a copy of your credit report, in advance, by you, is strongly recommended.

And, oh yes, what about that Government Issue we mentioned. That’s one of the great secrets and tips we promised to reveal. Did you know that probably 90% or more of financing a franchise business in Canada revolves around a special loan program called the CSBF/BIL loan? It’s a federal program, and administered by financial institutions. Whats so great about it - limited personal guarantees, great rates, terms and structures.

Speak to an expert in franchise financing when you are looking to obtain finance for a franchise - seek out someone who is trusted, credible and experienced. Be prepared, and get ready to be successful.

-

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/financing_franchise_business_finance_for_franchise.html