Franchise Business Financing : Managing Headwinds In Your Franchising Finance Challenges As A Franchisee

The Best Of Times.. Or Worst Time To Finance A Franchise ?


OVERVIEW – Information on franchising finance in Canada . Franchise business financing requires a solid understanding of some key principles and facts



Franchise business financing in Canada requires solid basic knowledge around those ' headwinds '

that buffet the franchisee about when he or she is seeking a franchise solution. Without some expert help the franchisee potentially can fail in his efforts to successfully finance a business. Let's dig in.

The Canadian franchise sector as a whole couldn’t be more ' busy ' - in fact many maintain its ' hot '. A fairly solid economy, as well as the desire to become an entrepreneur of sorts makes franchising attractive. Corporate downsizing also tends to offer opportunities to experienced individuals who might otherwise view starting a business as too ' risky'.

Part of the problem we have seen in many cases revolves around the fact that some franchisors do not properly investigate or asses franchisee financial and business qualifications in their sometimes haste to ' sell ' a franchise. Remember always that franchisors ' sell' franchises, they don't ' finance' them - that’s simply not their business or best use of capital.

Does the quality or reputation make a difference in the ability to finance your franchise? While there is probably no ' bad ' list of franchisors available it's safe to say that many franchises have a reputation of being a bit more ' tried and true ' when it comes to business success. In Canada the franchisee has the option of dealing with a Canadian franchisor, or a chain that has U.S. or foreign ownership. In some cases you might be dealing with a ' MASTER FRANCHISE ' - someone or an entity that has purchased the rights to a geographical territory, such as... you guessed it... Canada.

We've observed that for whatever reason some franchise sectors tend to attract franchisees more than others - they include restaurants/hospitality , training, hair, fitness etc. It's incumbent on you the franchisee to demonstrate to your lender that you have both the right combination of passion and experience to start, run and grow a franchise.

So let's bore down into the actual financing of your franchise. That financing is achieved by either a specialty franchise lender ( they are extremely limited in Canada ) , a bank ( highly improbable ) , a bank via the SBL loan ( highly probable by the way !) , and a combination of assorted financing services such as leasing, merchant advances, working capital term loans, etc.

So, getting back to... the bank! While all our Canadian banks have franchise ' units' they are heavily focused on arrangements with only the most popular , large and successful chains .

Traditional financing for a start up is simply not available without the franchisee putting up as collateral significant personal collateral, aka the home, savings, etc. Typically that's not desirable for the franchisee! Simply speaking, you might find that the guy in the bank commercial on TV is not the lender you deal with in the branch!

We referred to the Canadian SBL loan above; it’s a solid way to finance your franchise if you meet some basic criteria. That includes a reasonable down payment, a decent business plan, good personal credit history, the loan only finances equipment and leaseholds, but more often than not that’s the bulk of the financing needed. Personal guarantees under the program are also limited, which is attractive.

Typically you want to have a ' team ' in place to ensure legal and financing issues are in place to help cement success. That might include your lawyer, an accountant, and... when it comes to financing a trusted, credible and experienced Canadian business Financing Advisor with a track record of success
. You'll be in better shape to navigate those business and financing headwinds.



Stan Prokop - 7 Park Avenue Financial :
http://www.7parkavenuefinancial.com
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 - Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact :

http://www.7parkavenuefinancial.com/franchise-business-financing-franchising-finance.html



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

5 Franchise Business Financing Tips for Entrepreneurs in Canada

Expert advice is always a good thing – so wouldn’t it be great to get some solid advice on one of the larger decisions you’ll make in your business life – buying and financing a franchise in Canada. Franchise business financing is specialized and you want to ensure you have the proper ammunition to make the acquisition of your business successful. And that means of coruse a new turnkey franchise, or, in some cases, the purchase of a franchise from an existing seller or franchisor.

Let’s explore 5 key tips that should ensure your business financing success – they are as follows –

Pick the right franchise finance partner

Ensure the type of financing offered meets your needs

Don’t count or rely on the franchisor itself for financing – that rarely if ever happens

Understand franchise lending criteria in advance, and then ensure you can qualify for those criteria
Ensure your franchise is financed for purchase as well as ongoing needs


Let’s walk through some of the key points in those 5 tips – allowing you to feel more comfortable about the franchise financing process.

In Canada franchise financing is broadly available and at the same time very boutique and specialized in nature. What do we mean by that statement? Well the majority of franchises in Canada are financed under a special government program called the BIL or CSBF program. It is underwritten and supported by the government, but in case you haven’t seen a government franchise financing office on your corner, here’s the deal on that! The program is administered by Canadian banks, but under the government auspices. We tell clients that only a limited number of Canadian bankers understand the program, can move through it efficiently, and get you approved.

We mentioned a key point in our Tips that indicated you must understand the criteria for both the above mentioned program, as well as other financing available. We advise clients that general criteria for a franchise loan are as follows : decent personal credit history , a respectable down payment ( more about that later ) , some industry experience in the type of franchise you are purchasing, and you must be a Canadian citizen or landed immigrant – bottom line – can you legally borrow in Canada . Broadly speaking satisfying those criteria should allow you to get out of the gate quickly and commence your franchise financing process.

That brings us to another tip we noted, who exactly is your franchise finance partner. For a starter, given the unique nature of franchise financing we recommend you work with a trusted, credible and experienced franchise financing consultant. He or she will guide you through the finance maze and make you aware of all issues and conditions on an up front basis.

Secondly, don’t count on your franchisor to provide financing – they like selling franchises, not borrowing on their own account to get you started. Having said that a good franchisor will give you guidance on their own chains experience in how their franchisees are typically financed. Alternative to the bank franchise finance program sponsored by the government are a handful of specialized financed companies. We also have actively recommended working with equipment financing firms to finance some of the hard assets in your new business. That rounds out the strategy quite nicely.

Purchasing the right franchise and getting it financed is job 1. Job 2 should be ensuring that you have ongoing financing needs covered for things such as working capital, additional equipment or assets that might be needed down the road, staff and sales expansion, etc. You can address this most properly by carefully tuning your initial business plan to ensure that ongoing sales and costs can be financed properly.

Make sure the business can support any debt that you take on at a future point in time.
If you cover off carefully our 5 ‘Tips’ you are well on your way to entrepreneurial success in franchise financing in Canada.

--
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 6 years - has completed in excess of 45 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details:
http://www.7parkavenuefinancial.com/franchise_business_financing.html