YOU ARE LOOKING FOR FINANCING FOR A FRANCHISE!
Funding Loans For Franchises In Canada
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?
CALL NOW - DIRECT LINE - 416 319 5769 - Let's talk or arrange a meeting to discuss your needs
EMAIL - sprokop@7parkavenuefinancial.com
FRANCHISE FINANCING IN CANADA ( WHERE IS THE MONEY COMING FROM )
‘Money ... Money everywhere ...' we hear that all the time, but when it comes to financing loans for franchises for new franchise owners all of a sudden why do things seem a bit .. Shall we say ' scarce '?! Let's take a look at funding for new franchisees for your franchise business purchase for many franchises available in Canada!
THE IMPORTANCE OF A BUSINESS PLAN IN FUNDING YOUR FRANCHISE
Considering owning a franchise? Funding franchises becomes of prime importance once the franchisee has selected its business model and signed a franchise agreement with a franchisor. While there are solid ' textbook ' 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.
FRANCHISORS DON'T FINANCE THEIR FRANCHISES!
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 the 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.
The bottom line for aspiring franchisees? Direct franchisor financing for a franchise owner is almost never available - franchisors sell franchises - Franchisors typically don't finance them! Note also you can buy an existing business franchise with permission from the franchisor and sale pricing from the current franchise business owner. Many franchisors do have relationships with certain financing programs, which should be explored by the franchisee.
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 financing approval. But we can comfortably say they can reduce some of the 'hassles '.
KEY STRINGENT CERTAIN REQUIREMENTS FOR FRANCHISE FINANCE APPROVAL
We also caution clients to spend some time understanding what some of the actual franchisor requirements are when it comes to financing as they vary greatly :
A Minimum personal net worth,
Owner equity contribution,
etc . We've got several ' war stories ' around franchisees not even understanding what their franchisor required, let alone their financing entity!
SOME CRITICAL NEEDS IN FRANCHISE FUNDING / START UP COSTS
The actual amount of capital required to purchase your business and ' open the door ' so to speak is where things either fall apart or 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:
Upfront franchise fees/qualification standards
Equipment / More money for additional assets required to run and grow the business
Marketing Support / Website, etc
Leasehold Improvements
Sufficient funds for working capital and obligations of ongoing royalties under favourable terms
Rolling stock
Real estate if you have purchased a franchise that has a real estate component to it.
REALISTIC CASH FLOW AND REVENUE PROJECTIONS
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!
CONCLUSION - FINANCING YOUR FRANCHISE
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 to supplement the loan amount required
Your combination of loans that successful funding your franchise requires
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.
CONSIDER GOVERNMENT SMALL BUSINESS LOANS FOR YOUR FRANCHISE
In Canada financing loans for franchisees come from either the Government 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 for financial assistance when their requirements are under $ 350,000.00, which is the cap on the program. Your franchise fee, previously not financeable under the program is now able to be financed under this term loan structure. This allows franchisees to save additional money for day-to-day working capital needs.
The Canada Small Business Financing Program is the Canadian version of SBA loans in the U.S. - These are term loans, not government grants. Talk to the 7 Park Avenue Financial team about which financial institutions offer the program. Other factors that make the program desirable include lower interest rates and flexible repayment terms. ( Business owners are always focused on a good interest rate !)
A good credit score/ credit report and personal credit history/ financial history is required for the franchise purchase under this program. It's important to have your personal finances in order. Alternative lenders often have less stringent requirements - they are non-bank financial institutions and place less emphasis on credit scores under a financing option.
So yes, ' money money everywhere '... if you're well prepared, have a solid loan package and complete business plan that reflects time and realism around funding and shorter turnarounds in approvals - ie is your business profitable enough to repay financing under repayment terms that make sense for the business.
Family member loans/angel investors etc. rarely work in franchising - For access to loan options actual financing speak to 7 Park Avenue Financial, a trusted, credible and experienced business financing professional that has proven expertise in franchise funding & advisory services around alternative and traditional financing options as a one stop shop for you to be successful and make better decisions around your business purchase
FAQ: FREQUENTLY ASKED QUESTIONS
Can you get financing for a franchise?
There are many traditional loans and alternative financing options available, including government loans - Franchisees looking further ahead at growth stages can upgrade facilities or purchase new pieces of equipment under various options.
Each type of financial institution has its own set criteria so franchisees should be sure to ensure what each type of financing entails while considering other aspects of funding.
Click here for the business finance track record of 7 Park Avenue Financial
