Financing A Franchise? - Here's How Franchise Finance Works in Canada

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Franchise Business Financing in Canada: Your Blueprint to Success

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        Financing & Cash flow are the biggest issues facing business today

   ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

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Or Email us with any question on Canadian Business Financing

EMAIL - sprokop@7parkavenuefinancial.com

 

Mastering the Landscape of Franchise Financing in Canada | 7 Park Avenue Financial 

 

 

Canadian Entrepreneurs: Your Key to Franchise Financing Success

 

 

Introduction

 

Canadian entrepreneurs and prospective business owners aspiring to invest in a franchise face the quintessential dilemma of obtaining suitable financing for a business loan to buy a franchise. While the journey towards owning a franchise is exhilarating, ensuring a stable financial foundation is crucial. Let's dive into the intricacies of business cash flow financing and working capital solutions tailored for the Canadian business landscape.

 

 

Navigating the Waters of Franchise Financing in Canada 

 

Canada is ripe with franchise opportunities, but securing the right financing to support these ventures can be a daunting task. Being prepared and informed is your greatest asset.

 

The Myth of Traditional Financing

 

A common misconception among franchisees, especially those without a financial background, is that mainstream banks and credit unions will readily finance their franchise dreams. The truth is somewhat mixed. While no Canadian bank typically offers a specialized term loan for total franchise financing (unless backed by hefty collateral, spotless credit, etc.), many provide financing through a specific avenue—the CSBF/BIL program.

 

 

The CSBF/BIL Program: Your First Financing Stop

 

This program should be at the forefront of your financing strategy. But here's the catch: the program has limitations on what parts of the business it can finance. This means entrepreneurs need to independently finance certain segments, such as ongoing working capital or the franchise fee. Expert guidance can navigate you through these murky waters.

 

 

The Power of Brand Association 

 

Choosing a franchise with a robust brand identity and market presence can simplify your financing journey. The stronger the brand, the more comfortable lenders might feel in trusting your venture.

 

  

Deciding on  Buying New vs. Established Franchises  

 

 

Are you buying into a new franchise or taking over an existing one? Both options have their merits and challenges. For instance, financing an existing franchise might sometimes be more straightforward due to tangible assets, cash flow, and evident profitability.

 

  

  
 

Key Takeaways in Canadian Franchise Financing  

 

1. Owner Equity: Your personal investment plays a pivotal role in the financing equation.
2. BIL Program: A lifeline for many franchisees, but with specific coverage limits.
3. Asset & Working Capital Financing: Balancing asset-specific financing with a working capital loan or operating facility can lead you to success.

 

Franchise Financing Landscape in Canada:  

 

• Canadian Specificity: Canada has its own unique landscape of franchise opportunities and financing solutions.
• Mainstream Banks vs. Specialized Programs: While traditional banks are not always the primary go-to for entire franchise financing, they play a significant role via specialized programs, particularly the CSBF/BIL program.
•  

The CSBF/BIL Program:

• Core Financing Mechanism: This government-backed program is the backbone for many franchisees seeking financing in Canada. It provides support for asset-based requirements of a franchise.
• Limitations: While being a major player in franchise financing, it doesn’t cover all costs, like ongoing working capital or the franchise fee.

 

 Owner Equity & Personal Investment: 

• Significance: Your personal stake or investment in the franchise plays a pivotal role in securing additional financing. Lenders want to see that you have skin in the game.

 

Brand Strength & Market Presence:

• Lender Confidence: The reputation and market position of the franchise you’re looking to invest in can make a significant difference in obtaining financing. Strong brands tend to inspire more confidence in lenders.

 

  

Asset & Working Capital Financing:  

• Balanced Financing: Beyond the initial purchase, managing day-to-day operations requires a blend of asset financing and working capital solutions. These can be achieved through a combination of term loans and operating facilities.

 

 Conclusion 

 

Choosing the right franchise is just half the battle; obtaining the necessary financing completes the journey. Call 7 Park Avenue Financial, a trusted, credible and experienced  Canadian business financing advisor can streamline this process, ensuring that you have a financial package tailored to your acquisition and growth requirements. Remember, in the realm of franchise financing, preparation and knowledge reign supreme.

 

  

FAQ: FREQUENTLY ASKED QUESTIONS / PEOPLE ALSO ASK  / MORE INFORMATION

 

  

What are the typical prerequisites for obtaining franchise financing in Canada?

To secure franchise financing in Canada, lenders usually look for:

• A comprehensive business plan outlining your vision and strategies.
• A credit history review to assess reliability.
• Details about the chosen franchise, including its market position and profitability.
• Personal investment or owner equity to show commitment.
• Collateral, which can be personal or business assets.

 

How long does the franchise financing approval process typically take in Canada?

 

The duration varies based on the lender and the complexity of the application. However, on average, once all required documentation is submitted, it can take anywhere from a few weeks to a couple of months. Working with specialized franchise financing advisors can sometimes expedite the process.

 

How does the interest rate for franchise loans compare to regular business loans in Canada?

Interest rates for franchise loans are generally competitive and might be slightly higher or lower than regular business loans. Factors influencing the rate include the franchisor's reputation, applicant's creditworthiness, the economic environment, and the lender's policies.

 

Can I negotiate the terms of my franchise financing agreement in Canada?

Yes, terms are often negotiable, especially if you're working with private lenders or alternative financing platforms. It's beneficial to review all terms carefully and consider consulting with a financial advisor or attorney to understand and potentially negotiate better conditions.

 

 

 

What makes franchise financing different from regular business loans in Canada? 

 

Franchise financing is tailored specifically for purchasing or expanding a franchise. It often factors in the reputation of the franchise, specific costs like franchise fees, and might utilize specialized programs like the CSBF/BIL.

 

How can franchise financing benefit a new entrepreneur in Canada?

 

Franchise financing provides a structured approach to obtaining capital, leveraging the strength of established franchise brands, which can make the lending process smoother for newcomers.

 

Are there specific franchises in Canada that are easier to finance due to their reputation? 

Yes, franchises with a strong track record, brand identity, and consistent profitability often have better financing opportunities, as lenders view them as lower risk.

 

Can franchise financing in Canada cover all costs associated with opening a franchise? 

While franchise financing can cover a significant portion, it may not cover all costs. Items like ongoing working capital or franchise fees might need additional funding sources.

What's the role of personal investment or owner equity in the franchise financing process?

Owner equity demonstrates commitment and reduces the lender's risk. It often plays a pivotal role in securing additional financing and obtaining favourable loan terms.

 

 

What Are Some Valuable Tips to Finance a Franchise?

 

• Understand the Total Cost:

  • Account for working capital in addition to the franchise price.
  • Incorporate sufficient working capital into loan requests.
  • Consider loan terms that protect working capital, such as postponing principal payment.

• Shop Around for Your Loan:

  • Consult multiple institutions for better financing terms including a line of credit for ongoing business needs
  • Diversify financing sources to mitigate risks. A commercial bank loan is not the only option - Buyers should make sure they have an acceptable credit score

• Grasp Your Contract's Terms:

  • Familiarize yourself with franchise purchase agreement nuances.
  • Understand lease ownership and repayment obligations, including royalties. Franchisor financing is rarely available directly although some franchisors partner with financial institutions to assist the franchise owner

• Evaluate Your Investment Capacity:

  • Have funds available beyond the down payment for unexpected business needs.
  • Ensure availability of funds either personally or through bank loans and alternative lenders

• Prepare Necessary Documentation:

  • Ensure availability of the franchise agreement draft, statement of personal finances, and a business plan for lenders.
  •  

Click here for the business finance track record of 7 Park Avenue Financial

How To Finance A Franchise In Canada

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YOU’RE  LOOKING FOR  FRANCHISE FINANCE ADVICE  AND SOLUTIONS!

FUNDING YOUR NEW FRANCHISE BUSINESS LOAN

You've arrived at the right address! Welcome to 7 Park Avenue Financial

Financing & Cash flow are the  biggest issues facing business today

ARE YOU UNAWARE OR   DISSATISFIED WITH YOUR CURRENT  BUSINESS  FINANCING OPTIONS?

CONTACT US  /CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs

EMAIL - sprokop@7parkavenuefinancial.com

7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8

 

 

Financing Your Franchise in Canada: A Comprehensive Guide 

Introduction

 

Embarking on a franchise venture in Canada? Worried about financing hurdles? It's a common concern for budding entrepreneurs. However, understanding the nuances of financing franchises can turn this daunting task into a manageable one. Here's your essential guide to obtaining a franchise loan in Canada.

Decoding Franchise Financing Options

What’s Available to You?

 

Determining the right kind of franchise finance solution is the first step. Whether you're launching a service-based venture or stepping into the hospitality sector, you need to blend term loans with working capital. Understanding your franchise's cost and associated risks is paramount.

The Importance of Creditworthiness A strong personal credit score not only smoothens your franchise loan approval process but also fetches competitive interest rates. A solid financial plan further elevates your chances of acquiring optimal loan terms.

Franchise Popularity in Canada

 

An interesting insight by Franchise 101 reveals the growing popularity of franchises. With approximately 76,000 outlets and a new one opening every 2 hours, franchises are becoming a mainstream business model in Canada.

Personal Investments: The Equity Component

Your own financial Stake: It's imperative for franchisees to inject personal funds into their venture to demonstrate their own equity position. This showcases commitment to both lenders and franchisors.

For those questioning, "Can I finance a franchise without any money?" the answer is clear: No. A harmonious blend of debt and equity is essential for success. In many cases, financing via multiple lenders might be needed to cobble together a full financing.

 Importance of Business Plans and Cash Flow

Crafting a Viable Repayment Strategy Incorporate your equity investment into your cash flow projections. A comprehensive balance sheet, reflecting both equity and financing, offers a clear snapshot to financial institutions. 7 Park Avenue Financial specializes in creating robust business plans, ensuring they align with lender requirements.

Navigating Franchise Loan Structures

 

Understanding Loan Terms -  Common franchise loans span between 5 to 7 years, enabling you to offset your debt within that timeframe. While considering future needs like asset replacement or working capital, remember that government-guaranteed loans, such as the Canada Small Business Financing Program, offer reliable franchise financing solutions. A notable 2021 amendment even allows financing the franchise fee as a loan component.

 Maintaining Realistic Financial Assumptions

Grounding Your Projections: While optimistic forecasts can be tempting, it's crucial to ground them in reality. This includes factoring in revenue timing, asset costs, growth rates, franchise fees via the franchise agreement, and the need for business lines of credit around day-to-day operations.

Embracing Financial Fundamentals / Beyond Just Sales

 

 

While sales are essential, a deep understanding of repayment structures, profits, cash flow, and fixed costs is equally crucial. Grasping these elements can significantly impact your franchise's success.

 

 

Conclusion 

Conclusion Navigating the franchise financing landscape in Canada might seem overwhelming, but it doesn’t have to be. While external collateral might not always be required, ensuring that your financial projections are sound is vital. Leveraging expertise, especially from trusted Canadian business financing advisors like 7 Park Avenue Financial, can steer you toward your franchising goals with confidence.



    

FAQ: FREQUENTLY ASKED QUESTIONS    

 

 

  

What Is Franchise Financing?

 

  

The franchise business model will typically require a combination of owner down payment, aka personal equity, and external financing.  The capital provided to finance a franchise will be a combination of an acquisition term loan and potential combinations of lines of credit and equipment financing. In certain franchise models, real estate might be a component of financing required.

 

Franchise financing is the funding you need to start or expand a franchise business. In Canada, it's essential because it provides the capital necessary to enter the competitive franchise market and realize your entrepreneurial dreams via small business loans suited to the financing you require.

Generally speaking franchisor financing, i.e. funding from the franchisor, is not available- Franchisors sell franchises, they don't finance them!  The franchise disclosure document provided by franchisors is a key read for prospective franchisees.

 

Do banks give business loans for franchises?

 

Canadian chartered banks and some credit unions provide franchise loans at a good interest rate. Still, the process to complete a  franchise  bank loan might be considered time-consuming because of the need for business financial statements around business credit, and buyer information, - as well as the requirement to provide personal collateral in the form of mortgages, and home equity loans and lines of credit by the franchise owner/business owner backed by a good credit report and personal credit history and  minimum credit score in the 600+ range

 

  

What type of down payment do you have to put down to acquire a franchise?

 

Franchisees looking to fund a franchise will normally be required to put between 20-50% down. The down payment varies based on a number of factors, including the type of financing, loan amount, and creditworthiness of the borrower.

 

 

What types of franchise loans are available in Canada, and how do I choose the right one for my business?
 

Funding for franchise owners via Canadian franchise loans for a franchise purchase comes in various forms, including traditional commercial bank loan funding,  Government Small Business loans, and franchise-specific financing options from non-bank alternative lenders who compete with traditional lenders such as chartered banks and credit unions. Choosing the right one depends on your financial situation and business needs when it comes to franchise businesses.

 

Are there any unique benefits to franchise financing in Canada compared to other countries?
 

Yes, Canada offers stability, a strong franchising ecosystem, and government support programs for small businesses, making it an attractive destination for franchisees. These factors enhance your chances of success.

 

What challenges might I face when seeking franchise financing in Canada, and how can I overcome them?
 

Challenges may include stringent lending requirements and competition for loans. Overcoming them involves thorough business planning, financial preparation, and seeking advice from experts in franchise financing and the franchise brand you have selected. The International Franchise Association is a good source of franchise information.

 

How can franchise financing empower me to achieve long-term success in the Canadian market?

 

Franchise financing provides the necessary capital to launch or grow your franchise, giving you the resources to build a strong brand presence, attract customers, and secure a profitable future in Canada's dynamic business landscape.

 

Click here for the business finance track record of 7 Park Avenue Financial

Franchise Business Loans In Canada. What You Can And Can’t Finance With A Franchising Loan

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Avoid Doing Something Wrong With A Franchising Loan 

 

 

Franchise business loans in Canada.  Can the prospective franchisee avoid doing something really wrong when arranging their franchising loan? We think we can help clarify, so let's dig in.

 

 

PICKING YOUR FRANCHISE / FINANCING YOUR FRANCHISE PURCHASE

 

While a lot of entrepreneurs focus on the particular business or industry segment they are looking to participate in they sometimes sorely miss looking at how the franchise financing industry operates. It's somewhat of a given that it’s up to you to pick the franchise that best suits your talent, expertise, and budget.  But when it comes to financing your business are you 100% sure of the expectations of your lender or lenders.

 

If there is any good news is that you do have some solid options available to yourself when financing your new business.

 

  

KEY ELEMENTS OF A  FRANCHISE LOAN FINANCING   

 

What exactly are some of the key elements of any franchise finance scenario? Well, they include the franchise fee, equipment, leaseholds, working capital, and ongoing capital and cash flow needs.

 

 THE NECESSITY TO FINANCE LEASEHOLD IMPROVEMENTS 

 

Leaseholds are one of the most misunderstood aspects of the franchise finance mystery or conundrum.  Typical leaseholds might include construction, HVAC, plumbing, lighting drywall, etc. If your franchise is not going to be fully financed by a specialty franchise lender then the best solution to financing leaseholds is under the auspices of the Govt small business loan program, In fact, this program was designed solely for two asset categories - equipment... and the leaseholds we have been talking about.

 

In certain cases, the franchise lender may wish the co-operation of your landlord when it comes to what is understood as collateral in the terms of your agreement with the landlord. The situation can sometimes become more complex if there is not clarity and understanding around certain assets that you as a franchisee may have thought was a leasehold improvement as opposed to assets that become attached to the building such as oven hoods, etc. (That’s in the case of restaurants, etc)

 

At the end of the day, it’s both the combined quality of the franchise you are buying as well as your own financial strength as determined by opening balance sheet and projected revenues and profits. Business plans and cash flow projections are a necessity in franchise loans - At 7 Park Avenue Financial we prepare a business plan for clients that meet and exceed the requirements of lenders.

 

If there is one continuous misunderstanding or misconception that we see in discussions with clients on franchise business loans it’s as follows: The franchisor rarely plays a key role in franchise finance. That’s your job or the job of you and your Canadian business financing advisor. At the end of the day, your goal is simple - you want to be in a position to raise the right amount of capital you need to open and develop your business for success. Only the smallest percentage of franchisors in Canada offer any real tangible financing assistance.

 

  

4 TYPES OF FRANCHISE LENDERS  

 

Who are in fact the lenders you should be working with when arranging your franchise loan? In broad categories they are:

 

SPECIALTY FRANCHISE LENDERS

THE GOVERNMENT SMALL BUSINESS LOAN (very well suited to franchise finance) These loans are somewhat similar to U.S. ' sba loans'

EQUIPMENT LESSORS - They finance equipment and in some cases leaseholds

CANADIAN CHARTERED BANKS - Ongoing working capital and cash management -

 

The reality is for many franchises the type of loan you need may in fact be a cobbling together of a number of different finance solutions. In some franchises, there may even be a real estate component that can be often addressed separately.

 

Important to note also that you can buy a new franchise or one being sold from a franchisee that is selling, with the approval of the franchisor of course.

 

DO BANKS REALLY FINANCE FRANCHISES? YOU DECIDE!

 

Since our theme is ' avoiding doing something wrong ' in franchisee finance it’s important for us to clarify bank loans in this industry segment. While a bank would consider financing your business directly it would place heavy reliance on your equity in the business, your personal credit, and collateral that you might have in savings, your home, etc.  In our opinion where the banks do a better job is in the underwriting of the BIL loan when it comes to direct franchisee finance. Franchisees should ensure they can demonstrate a good credit score in personal finances as well as a reasonable net worth , which will also affect the interest rate they can achieve. Interest rates are at an all-time low for every type of business financing and won't vary greatly in most franchise funding alternatives .

 

  

CONCLUSION  

 

To avoid making tragic, costly and time wasting mistakes in a franchising loan consider seeking and speaking to a trusted, credible and experienced Canadian business financing advisor who can asset you with franchise business loans that make sense for your future investment  and success.

 

 

7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

http://www.7parkavenuefinancial.com

Click Here For 7 PARK AVENUE FINANCIAL website !



7 Park Avenue Financial provides value-added financing consultation for small and medium-sized businesses in the areas of cash flow, working capital, and debt financing.



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 100 Million $ of financing for Canadian corporations.

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR

Stan has had a successful career with some of the world’s largest and most successful corporations. He is an experienced

business financing consultant

.

Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.


Stan has over 40 years of business and financing experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in-depth, hands-on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.

Click here for the business finance track record of 7 Park Avenue Financial







Stan Prokop
7 Park Avenue Financial/Copyright/2020

How To Finance A Franchise In Canada

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Can You Finance A Franchise ? Yes You Can !

Canadian entrepreneurs continue to explore franchise acquisitions in Canada as a way to maximize on the business opportunities provided by the franchise industry. Entrepreneurs evaluate franchising because it provides them with an ability to generate sales and profits from established business models – they can build equity in businesses and enjoy the benefits (perceived or otherwise!) of self employment and the entrepreneurial dream



As you start to formulate your ideas around purchasing a franchise the concept of how o you will finance your new business should be very close to the top of your list. Many clients we talk view the actual financing of the franchise as the largest obstacle to achieving self employment success.


The reality is that anyone with a reasonable business and work background, coupled with a stable financial situation (good credit bureau history, etc) should be able to successfully finance their venture.


Is there a secret to franchise financing in Canada! Yes, there is, and don’t by surprised by the answer , which is simply that you must have a thorough and solid proposal in hand, and the right people need to see that proposal. Unfortunately that isn’t as easy as it seems when you searching for franchise loans,


Sohow are franchises in Canada actually financed? During the last couple years, due to the world wide economic slowdown/recession franchise financing became a smaller fish bowl so to speak. The methods in which franchises were financing in some cases actually disappeared, and in most cases simply had the ground rules changed relative to whats required and how its works and how long it takes.


In Canada franchises are financed by, in most cases a government sponsored and subsidized loan that comes under a program known as the CSBF loan program. Additional a very select number of firms offer specialized franchise financing loans, and in our experiences we have complimented these two programs with basic lease financing of assets plus in most cases a working capital cash flow loan or an introductory line of credit to facilitate daily operations and long term growth.


So is there a key to success in franchise finance ? I Absolutely, and it starts with a solid executive summary and business plan that has some reasonable financial projections and assumptions attached to it. That is one critical key to understanding franchise loan requirements . The basic elements of that document are the business description, an overview of the basic business model and industry, financial projections, and a focus on the strengths of your business and its expectations of profits. Those profits will of course be cash flow to repay your franchise loan and debt.


We recommend to all clients considering and entrepreneurial career as a franchisee in Canada to discuss your franchise financing options with a credible and experienced advisor in franchise financing, sometimes known as a franchise loan broker .Keep your financing objectives at the very top of your list early on in your process, plan well, and present your proposal once, and properly. You will soon be en route to a successful new business with sales and profit growth!





7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop

Franchise Finance Lenders – The 4 Most Critical Things You Need to Know about Franchise Lending

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Looking For Real World Franchise Finance Possibilities? We've Got Them !


Information on franchise finance lenders in Canada. Solutions to franchise financing loan success are explored in this article

Clients are always asking us, who are the franchise finance lenders in Canada. At that point they have made the decision to invest their time and money in a new entrepreneurial business, and have chose to either purchase a new franchise, or, in some cases and existing unit. (There are a number of reasons why current franchisees want to sell their unit to you – but you should carefully explore the reason for the sale for the obvious reasons)


So what are the 4 most important things you need to address, assess, think about, and action in your decision to finance a franchise. We feel they are as follows: They are by no means in order of importance, but at the same time you probably won’t be successful until you are in a position to have satisfactorily addressed all the issues:


You should have some experience in the industry, of feel confident that you and the franchisor have the ability to get you up to speed in training if it is a new industry for yourself - ( We caution you that the number of franchise lenders in Canada place a certain amount of focus on management experience ). However, if you can demonstrate good business acumen and previous success that certainly will help the franchise financing process.

2. You must demonstrate that you have a solid business plan - yes this had to be; written out’ so to speak. If you do not have the interest or ability in generating such a document you should seek the services of a trusted, credible and experienced business financing advisor to prepare such a plan.

 In our opinion the reasonable costs associated with such a plan are in the 750-1000$ range , which is a small portion of your overall investment and if it produces the financing you need, as well as delivering on a reasonable financial action plan that surely is money well spent .

3. Location / Location/ Location! That phrase is of course used a lot in real estate business – if your franchise is one in which a location is important you should clearly seek out a location that will assist you in driving revenue and sales growth for your industry.

We caution many clients that their own belief in the value of the franchise and their own skills in taking the business forward cannot always overcome a bad location. So if that’s a key element in the franchise you are considering purchasing then one of the ways in which you can address that issue is usually free – it’s simply speaking to a local real estate agent, preferably one with business, not consumer experience, and getting advice and opinions on the location you are contemplating.

4. Capital – Money! The financing of your franchise in Canada comes from the two key elements of business. These two key elements are the same for your franchise as they are for a mega corporation such as IBM – The two elements are:
Debt
Equity


The equity portion of your investment is your own personal resources. You should never entertain the thought of obtaining 100% financing for a franchise – while that generally wont fly with any franchise lender, at the same time you would probably be over leveraged and a suitable candidate for business failure .


So how are franchises financing in Canada. Who are the franchise finance lenders?
The best and most popular program is a government loan that is underwritten by the federal government, the technical name for the program is the BIL program, and most Canadian business people know the program as the Small Business Loan.

It goes up to $ 500,000 in some cases and is by far the most popular method of obtaining franchise financing, in tandem with you own investment, which can be anywhere from 10-50% per cent of the total amount you require . In recent years the bar has been raised on your personal equity contribution into the business.


In summary, franchise lending in Canada is a somewhat of a unique boutique type of finance. Work on our four fundamentals we have presented – also seek out the services of someone who is a trusted, credible and experience franchise lender who can assist you in your transition to franchise purchase and franchise financing success.




7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop

How To Finance A Franchise – Options Galore? !

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Everything You Need To Know About Franchising Finance Options In Canada


Information on franchise financing options in Canada. Franchise loans must be suited to the franchise business model and financing requirements

Entrepreneurs who wish to purchase a new or existing franchise are always asking us ‘What are my Financing Options?”. The ability to choose the right financing option (in reality it is the right mix of financing options) is one of the most important aspects of your entry into the purchase and running of a successful franchise in Canada.

It is of course very rare that a franchise can be purchased for all cash, as the amounts involved can be very significant. And in fact, as we will demonstrate, in many cases that would actually be the wrong thing to do. Even the largest and most successful corporations in the world take on debt, there is good debt and bad debt of course (as consumers we now that also. By utilizing the right mix of debt and your own equity you can properly ‘leverage’ the business for greater rewards and returns.

We will use a quick and somewhat blatant and unrealistic example just to illustrate our point. Let’s say that you wish to purchase a franchise for 250,000.00, which is certainly not an uncommon amount. You have the option of paying cash for it (lets pretend!), or you can put 10,000.00$ down and borrow the rest. At the end of one year your franchise nets 20,000.00 in net income, let’s assume. If you had only put in 10,000.00$ of your own money you have generated a 200% return on equity. Even Warren Buffet would be jealous of you. However, had you put in 250,000.00$ of our own money you can clearly see you have many years to go before you get a positive return on your significant initial investment.

So what's our bottom line ? Simply that debt and the right amount of leverage can be a good thing, and it’s an excellent way to measure the potential returns in any business, including your investment into a Canadian franchise.
Let’s return to our core topic, financing your franchise. The reality is that are several options in Canada to finance your purchase. Those options can relate to either a new or existing franchise – both are quite financeable. One of the main reasons you might wish to consider purchasing an existing franchise is that in some cases the track record and the assets in the business might present an easier case for financeability.

Franchise financing in Canada is absolutely a specialized type of financing. When we sit down with clients to evaluate their options d and focus on the quickest and best way to achieve franchise financing success we can summarize your financing options in the following manner –
-Government Small Business Loan – (By far the most common and popular)

-Your own personal equity or down payment (typically from 10-50%)

- Equipment and asset financing

- Working Capital Term Loan

- Operating facility for ongoing requirements

- VTB – (Vendor take back) – in some cases the franchisor or the seller of the current franchise will waive full payment and agree on a final pre agreed upon payment to be made at some point in the future




Whether you consider yourself financially astute, or if you are concerned and worried that you don’t know enough about financing in general, it is strong recommended you align yourself with a trusted, credible and experienced advisor in franchise financing. Understanding your options, picking your options, and executing on those options within your timelines is the key to franchise financing success.






7 Park Avenue Financial :
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8

Direct Line = 416 319 5769

Email = sprokop@7parkavenuefinancial.com

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.



Stan Prokop

How to Achieve Franchise Financing Success in Canada

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Information on franchise financing in Canada. The ability to access and place proper business finance in place is key to franchisee success in Canada's hottest industry segment

Franchise financing is an integral part of the Canadian entrepreneur’s challenge of obtaining and building a success Canadian franchise. As most Canadian business owners quickly discover, franchisors do not provide direct or indirect financing in the Canadian marketplace. This leaves the business owner essentially on his or her own to generate the capital they need from chartered banks, finance firms, and other institutions.

It goes without saying that the budding entrepreneur needs to first make a significant investment in general franchise knowledge – i.e. the pros and cons, as well as of course focusing on financing the franchise.

Franchises in Canada are product and service related. When you purchase the franchise you should have strong level of confidence that the concept is proven and successful, as you will be trying to replicate that success based on the products, services and brand awareness of the franchisor.

Franchisees are encouraged to do a proper level of due diligence based on that availability of information with respect to the business success of the franchisor. If you are considered a franchise that is owned and run by a large well know public company – think McDonalds! You of course have the ability to carefully review the financial statements and management commentary that is available to anyone by virtue of the companies listing on the public stock exchanges.

The good news about franchise financing and the risk that the business entrepreneur takes is that there is a significant amount of disclosure required by law to you as a franchisee. In Canada, as well as the United States you should have the ability to get a copy of the franchisors financial statements. If you don’t feel qualified to read and interpret a financial statement you should use the services of a trusted franchise financing advisor, or even your accountant or lawyer would be good choices.

Many franchisors in Canada will of course gladly give your franchisee references, and you should clearly talk to other franchisees about financial performance with respect to what you hope to achieve based on your personal investment and borrowed funds . When we say ‘ financial performance ‘ we of course mean general business basics such as sales, profits, working capital challenges , leverage ( how much debt do you need to take on ), etc .

In financing a franchise you clearly want to understand how much debt you are going to take on – this is also directly commensurate with what you need to put into the business as your own investment. Most business owners today fully realize that a franchise can never be 100% OPM. OPM= Other Peoples Money!

Our experience in Canadian franchise financing is that the financing of your newly acquired business has is a combination of your own investment, as well as borrowed funds. Franchise financing success in Canada is most commonly achieved by your utilization of the CSBF program, which is one of Canada’s best programs for small and medium sized business. This program provides up to 90% financing of leaseholds and fixed assets. When our firm structures a franchise financing we supplement the CSBF program with a combination, as required, of lease financing, and in some cases a cash term loan if in fact that is required .

In summary, by carefully selecting your franchisor, understanding your overall financial risk, and carefully putting together a financing package that fits your needs, you will have a very strong chance of being successful in your franchise venture.

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

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 100 Million $ of financing for Canadian corporations .

' Canadian Business Financing With The Intelligent Use Of Experience '

ABOUT THE AUTHOR
Stan has had a successful career with some of the world’s largest and most successful corporations.
Prior to founding 7 Park Avenue Financial in 2004 his employers over the last 25 years were, ASHLAND OIL, ( 1977-1980) DIGITAL EQUIPMENT CORPORATION, ( 1980-1990) ) CABLE & WIRELESS PLC,( 1991 -1993) ) AND HEWLETT PACKARD ( 1994-2004 ) He is an expert in Canadian Business Financing.

Stan has over 40 years of business and finance executive experience. He has been recognized as a credit/financial executive for three of the largest technology companies in the world; Hewlett-Packard, Digital Equipment and Cable & Wireless. Stan has had in depth, hands on experience in assessing and evaluating thousands of companies that are seeking financing and expansion. He has been instrumental in helping many companies progress through every phase of financing, mergers & acquisitions, sales and marketing and human resources. Stan has worked with startups and public corporations and has many times established the financial wherewithal of organizations before approving millions of dollars of financing facilities and instruments on behalf of his employers.

Stan Prokop