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The Other Half Of The Battle – Financing Your Franchise
How To buy a franchise. We guess that's challenge # 1. And # 2? It's of course franchise financing companies and solutions that will allow you to realize on the franchisee dream in Canada. That's our job we guess. Let's dig in.
PROPER FRANCHISING FINANCE SOLUTIONS HELP THE ENTREPRENEUR BE SUCCESSFUL
It goes without saying (but we will anyway) that the goal of every new entrepreneur in the franchise industry is to be successful. Putting a proper financing package together with solutions that match your needs, budget and cash flow is what that's all about.
FINANCING TO PURCHASE THE BUSINESS - AND FINANCING TO RUN THE BUSINESS
It's really a combination of financing you need to purchase and acquire the franchise and then funds required to run it. Although most franchises are run on a cash flow positive basis - ie cash sales, etc there still is a working component to your transaction. No matter how carefully you've prepared your budget and cash flows Murphy's Law always seems to kick in on occasion.
FRANCHISE LOANS ARE A COMBINATION OF YOUR EQUITY DOWN PAYMENT AND DEBT
In Canada the financing that you secure comes from yourself, that’s the equity component, and one or a combination of debt scenarios - your loan/loans. Financing from debt and equity typically covers franchise fees, equipment, leasehold improvements, and potentially a working capital component. Spending some careful time on the breakdown of those components will save you a lot of grief in the long run. Oh, and by the way your banker or commercial lender needs to see those also! Personal finances are also important, and you should be able to demonstrate a good credit score and reasonable net worth as well as business experience.
SBL LOANS TO THE RESCUE - THE CANADA SMALL BUSINESS FINANCING PROGRAM TO THE RESCUE
The goal of every business borrower in Canada is to minimize risk - to that extent you should try and avoid securing personal assets at all cost. One way to do buy a new franchise is via an ' SBL '.
An ‘SBL’..? It's the trade name for the Government of Canada Small Business Loan, and hundreds, if not thousands (we’re not really on a first name basis with the govt) of franchisees utilize this program. It was certainly NOT created to specifically address the needs of franchisees in Canada, but boy has it turned out that way.
So why an SBL franchise loan? Some pretty basic reasons really - low competitive rates, limited personal guarantees, no personal collateral, and flexibility as to repayment without penalty etc. That's a powerful combo of benefits in case you haven’t figured it out already.
Franchisees can of course pay cash for their business purchase, and even contribute their own capital to financing the operations and growth of the franchise. However, we've always guided our clients not to collapse RRSP's, take out collateral
Home mortgages, borrow from friends and family. While those solutions work they quite frankly mix up your personal and business finances in an unhealthy way.
If you aren’t securing a Govt small business loan for your franchising you need the assistance of a specialized franchise finance firm. Alternatively, other Canadian lenders can assist you with solutions based on equipment finance scenarios that can help franchise owners.
A good credit score is required for all franchise loans, and it should be noted that typically the franchise fee itself is not financeable. The interest rate on a franchise business loan is very competitive and the government-guaranteed loan program has numerous other benefits that add the flexibility of the program. If the franchisors franchise agreement allows existing franchises can be purchased and financed.
One suggestion? Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your goal to buy a franchise and the solutions available to complete a successful acquisition of a new or existing business in Canada's fastest-growing business segment. A business plan is strongly recommended, if not required for any type of business financing and at 7 Park Avenue Financial we prepare business plans that meet and exceed the requirements of government loan programs and Canadian banks.
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
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.
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
