Franchise Financing In Canada : Funding Franchises Shouldn’t Be Hard

Engineering the right Franchise Financing Loan In Canada

OVERVIEW – Information on franchise financing solutions in Canada. Funding franchises successfully is dependant on a number of key factors



Funding franchises in Canada shouldn't be difficult, but for many... it is. Let's look at the right way to approach franchise financing in Canada, which by the way includes simply the right information and the proper assistance. Let's dig in.

After the potential franchisee has spent a significant amount of time in seeking out the right franchise opportunity it’s critical to engage your franchisor in the right discussion around financing requirements. While they directly don't finance your new business they can often provide both guidance and direction on how franchises in their system are in fact financed.

In Canada some of our chartered banks do in fact have ' programs' in place with large franchisors that have significant ' branding ‘. (Think donuts/hockey player and clowns/burgers as an example!) . It's these types of relationships that can often help a large financing challenge become easier.

More often than not though, as much as he or she doesn't want to be, the franchisee is in fact on their own. So if they don't have the expertise to understand the lender landscape in Canada they are somewhat doomed to failure.

For any type of business financing in Canada its all about criteria, understanding, and meeting! Being armed with the right information required by a lender will get the ball rolling. That information typically is a solid business plan/executive summary, a financial road map that includes an opening balance sheet and cash flow projections, as well as the usual information around the owners financial worth and credit history, etc. 99.99% of franchisees incorporate their business, or buy an incorporated business, so some of those details need to be attended to also.

The lending landscape for franchising in Canada, unlike the U.S., can hardly be called ' robust. If you are dealing with a ' specialized' franchise lender the solid alternative is utilizing the Canadian govt SBL loan. It funds a lot of new businesses in Canada, and the franchise industry here has found it’s well suited for business funding. It's the Canadian equivalent of the ' SBA ' program.

Key aspects of the SBL program in Canada include, but are not limited to:

Limited personal guarantee

Competitive start up pricing on financing

Ability to finance assets as well as leaseholds

Solid structures including 5-7 year typical amortizations


Some potential franchisees might think that they might receive assistance around the actual final price as agreed to by you and the franchisor. This is NOT the case.

Additionally many entrepreneurs choose to buy an existing franchise for a variety of reasons. Here again the actual value of the franchise being purchase must be determined by yourself and the seller. As a general rule franchises in certain industry segments are sold and valued as a % of the actual sales revenue. For example an existing automotive transmission business typically might be valued at 40 - 50% of actual annual sales revenue. A QSR (quick serve restaurant) might typically go for 30% of actual revenues being achieved. Suffice to say many other factors should be considered when valuing and financing an existing franchise.

In financing a franchise in the Canadian marketplaces you should focus on size of investment required, break even analysis on sales, expected income for the owner, and ultimately whether the opportunity is a good ' Return on Investment '.

In Canada in certain cases even franchisors themselves will need financing of some sort. Here issues such as # of corporate/franchise locations, gross chain revenues, and exit or repayment strategies must be on the table.

If you are looking for the right way to ' engineer' franchise funding in Canada seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your franchise financing needs.









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 :

7 Park Avenue Financial = Canadian franchise financing expertise!







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

Financing Loans For Your Franchise . ‘ Money Money Everywhere ‘ .. Kind Of . Funding Canadian Franchises

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.

7 PARK AVENUE FINANCIAL
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