Canadian Franchise Funding Tips
Information on accessing capital for financing loans for the Canadian franchise . Funding franchises is specialized finance!
‘Money ... Money everywhere ...' we hear that all the time , but when it comes to financing loans for franchises all of a sudden why do things seem a bit .. Shall we say ' scarce '?!
Funding franchises becomes of prime importance once the franchisee has selected their business model and franchisor. While there are solid ' text book ' reasons as to why you need a business plan (some might call it a strong executive summary) one of the main ones is it's a key part of your business loan application for a franchise.
We'll focus on a bit more detail as to what’s in those business plans a bit later. Many franchisees (that’s you!) somewhat mistakenly believe that their franchisor, be it Canadian or U.S. has a special program of financing available. We can say this is partially true, because many of the larger more established chains have taken the time to profile their business and business model with various financial institutions, in some cases banks also.
While the franchisor ' program ' we're talking about in the above will help you understand some of the basics you should never assume they guarantee you a financing approval. But we can comfortably say they can reduce some of the ' hassle '.
We also caution clients to spend some time understanding what some of the actual franchisor requirements are when it comes to financing, minimum personal net worth, ownership equity contribution , etc . We've got several ' war stories ' around franchisees not even understanding what their franchisor required, let alone their financing entity!
The actual amount of capital required to purchase your business and ' open the door ' so to speak is where things either fall apart of come together. That’s because an astute and well prepared franchisee will take the proper amount of time to spend on the financials of the business, and that includes areas such as up front franchise fees, equipment, leaseholds, rolling stock, and in some cases even real estate if you have purchased a franchise that has a real estate component to it.
We alluded previously to the business plan as a key part of your journey on funding franchises in Canada. The finance part of that business plan should show an opening balance sheet and realistic cash flows that reflect the start up and growth of the business. Oh, and don't forget that the lender will want to see their loan payment in there also, reflecting their main interest in your business... how they will get paid! Oh and don’t forget there is lots of relatively inexpensive help to get your business plan completed if you’re not the type that dreams about balance sheets , income statements and projections!
If we had to summarize it we could easily say that the key elements of a successful plan for financing loans for a franchise are simply the following:
Your own financial contribution
Your combinations of loans
In Canada you can purchase a franchise and finance it properly with anywhere from a 10-50% equity contribution from yourself. Those funds tend to be permanently required in nature and vary based on the size of the franchise.
In Canada financing loans for franchisees come from either the Govt Small Business Loan program or specialized finance firms that might have a program arrangement with your franchisor / master franchisor. Thousands of entrepreneurs choose the SBL loan as their proven funding vehicle when their requirements are under $ 350,000.00, which is the cap on the program.
So yes, ' money money everywhere '.... if you're well prepared, have a solid loan package that reflects time and realism. For access to actual financing you might choose to seek out and speak to a trusted, credible and experienced business financing professional that has proven expertise in franchise funding.
CANADIAN FRANCHISE FUNDING EXPERTISE
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_loans_for_franchise_funding_franchises.html
