Financing A Franchise Business . Behaving Properly With Franchising Lenders In Canada!

Canadian Franchise Finance - Got a Strategy?


Information on financing a franchise business in Canada . Do’s .. and Don’ts ! of Canadian franchise finance



Financing a franchise business in Canada requires in our opinion a certain measure of ' good behavior ‘when it comes to dealing with franchising lenders.

What do we mean by that? Well ' behavior ' in the sense that it’s important to understand where your lender / lenders are coming from vis a vis their expectations on your transaction and what they expect. In our opinion once you have a certain measure of respect and understand the requirements and some of the lender psychology behind the transaction you'll be better off. And by ' better off' we of course man your chances of final approval increase substantially.

Most franchisees in Canada quickly realize that after they have made the decision to purchase a business within the Canadian franchise environment that they don't have all the capital to complete a transaction themselves. They require financing of some sort. That's when they typically start talking to financial sources and often seem overwhelmed around the requirements they might be asked to fulfill to complete a transaction.

Even the personal guarantee can often become an issue with the franchisee applicant. And that leads to thoughts about whether in fact a personal guarantee is in fact always required on a franchise transaction /

Although you might assume that the franchisor and lender might be working hand in hand on your transaction this is rarely the case, certainly in any direct manner.

What your franchisor can do however is to provide some measure of guidance on how other franchisees have in fact completed transaction within their chain. So whether you go to a bank, a private commercial financial institution, or one of a myriad of independent finance firms who can assist you we can categorically say it's up to you to do your homework on the requirements for financing.

So, where are those franchise lenders coming from when they are looking for a bit of respect and good behavior around their requirements .? A good start is simply to understand that no franchise in Canada is financing on the 100% OPM principal. OPM is of course ' other people’s money '. So you need to understand the lender had an immediately expectation that you are bring a down payment / equity scenario to the table.

Unless you are getting direct financing under the government small business loan you should be totally prepared to provide good disclosure on your personal net worth and credit history. While the majority of franchises, in our opinion, are financed under the Government SBL loan program the reality is that also requires a decent personal credit history and solid evidence of net worth commensurate of course with the size of the franchise you're purchasing g.

Credit and character go hand in hand so the expectation from franchising genders is that you got some solid business or industry experience and that you present yourself properly during your submission process. This includes having a crisp, solid business plan for your new business, as well as other standard supporting documentation required when you're financing a franchise business in Canada.

So, is there a bottom line? If there is one it’s pretty common sense oriented... namely understand where lenders are coming from in their requirements to franchise your business and your ability to professionally supply that info, and understand why they require that information will go a long way towards franchise financing success.

Speak to a trusted, credible and experienced Canadian business franchising advisor for assistance with your franchise proposal, with a focus on 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 . 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/financing_a_franchise_business_franchising_lenders.html

Canadian Franchise Finance Isn’t What You Think! Financing a Franchise Business Properly

Misconceptions. They are all over the place when it comes to financing a franchise business successfully, and properly. Let's wade into some of the key factors that allow you as an entrepreneur in the Canadian franchise finance industry to complete a transaction that meets your business and personal goals.

As noted, there is a lot of poor information out there about the challenges of financing a franchise in Canada. Let's focus in on whats important, whats achievable, and what you don’t have to worry about.

We can relate to clients who are making a significant life change and personal financial investment to purchase a franchise. You have access to some funds but the challenge of financing their new venture properly seems somewhat daunting.

Is there financial assistance in completing a franchise properly? Absolutely, but you must be prepared in every sense of the word.

Step one is often simply to properly identify the total amount of borrowing you need. Unfortunately we meet with some franchisees that have completed a franchise closing, only to find they are quickly running out of working capital to run their business on an ongoing basis. So close, yet so far.

The costs to finance a franchise involve what we call the soft costs to set up your business; they typically include franchise fees and professional fees such as those for an accountant, lawyer, etc. In our experience it makes strong sense for the owner to finance those soft costs themselves, leaving the hard assets and working capital for the franchise loan itself.

Here's something that surprises clients, as it appears to be a contradiction in terms. Canadian business financing itself is a challenge, but franchise finance is not! That is because they are some excellent programs that focus specifically on financing a franchise business. If done properly, and don’t quote us on this, it’s almost a ' slam dunk! A huge and we mean huge portion of all franchises in Canada are financed by a guy named Bill.

So who is Bill? Actually we have spelled his name wrong, because B I L is the acronym for the Government federal loan program that typically finances most of the franchises in Canada.

So you thought franchise financing under the BIL might be difficult or onerous. If properly presented and prepared you have just been approved for , bar none, the best small business financing program in Canada - great terms of 5-7 years, limited personal guarantees, and , are you ready, great rates and structures on the financing itself.

Is financing a franchise business easy or hard? Our simple answer to clients on that is that if you are prepared its easy, if not, you are guaranteed to fail.

Key elements of being prepared a business plan and cash flow that demonstrates your experience, the business potential, and, what the lender wants to see, cash flow to show repayment of the debt.

OPM doesn’t work in Canada almost anywhere in Canadian business financing. OPM is other peoples money, simply signifying that your own investment must be reasonable and shared with the loan investment to represent the full financing. To put is even more simply, you need a reasonable down payment. Franchisees with poor or derogatory personal credit histories need not apply in our opinion. Why? Because the lender views a franchise business in the context of how you have managed your own personal affairs.

So is there a bottom line on your quest for Canadian franchise finance success. Yes, and its pretty simple - avail yourselves of financing that is geared toward this type of business , be prepared from a presentation perspective , and commit a reasonable amount of your own funds to the transaction, sharing the risk with the loan provider .
Speak to a trusted, credible and experience Canadian business financing advisor on moving forward successfully, avoiding unnecessary surprises, and allowing you to finance the franchise dream successfully.

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.

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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