YOU ARE LOOKING FOR A BUSINESS LOAN FOR A FRANCHISE PURCHASE!
FINANCING A FRANCHISE IN CANADA UNDER OPTIONS AVAILABLE
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
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Franchise finance success in Canada - What business person /entrepreneur wouldn't want to be a ' high achiever ' in the one critical area to success - franchising financing. Let's dig in.
ARE THESE GOOD TIMES FOR BUYING A NEW FRANCHISE
The good news in the franchise industry is that the few rougher years after the 2008 recession appear to be well over - let's not forget COVID Pandemic challenges though! ...that has made it easier for potential franchisees of new and existing franchises to acquire the capital they need - if. And it’s a big if... they know how to go about it when it comes to franchise finance.
WHAT IS THE MOST COMMON TYPE OF LOAN FOR PURCHASING A FRANCHISE?
The most common type ' of loan for a franchise is a ' term loan. ‘ It's a fixed payment loan that is amortized over a period of usually 3-7 years. These loans are acquired and achieved through only a small handful of sources - a specialty franchise finance lender, ' the bank ' ( more about that later ), and a combination of commercial financing options that, when cobbled together, put you on the path to loan success.
OTHER TYPES OF FINANCING MIGHT BE REQUIRED
All these solutions might include one or a combination of equipment and leasehold financing, working capital, credit lines, etc.
How you navigate the landscape of franchise lending (landscape in some cases might mean ' minefield ‘!) will depend on your ultimate success in securing capital.
HOW MUCH DOWN PAYMENT DOES THE FRANCHISEE NEED TO MAKE
One key component of the franchise acquisition is the owner equity, aka the ' down payment ' component. While there is no right amount that broadly qualifies all franchisees, a typical range is between 25-50%. KEY POINT - In some cases, you only need to demonstrate you have access to capital, not necessarily provide it.
WHAT ARE THE REQUIREMENTS OF A FRANCHISE LOAN PACKAGE APPLICATION
Your down payment, loan amount, and ongoing financial needs are best set out in the financial portion of your business plan. This document should clearly lay out the business's cost, your loan amount, incoming cash flows, your loan payments, and, most critical - the timing of your cash inflows. For example, while many franchises in the hospitality business are ' cash businesses, ‘other franchises might be selling on credit terms - whereby they will only collect their invoice sales 30-60 days later.
7 Park Avenue Financial business plans we prepare for clients meet and exceed bank and commercial lender requirements - Our plans demonstrate you can meet repayment terms through careful cash projections.
Franchisees should always be able to demonstrate a good credit score and personal credit history when looking for term loans to acquire their franchise business. Qualifications required from franchisors will vary greatly based on the nature of the franchise network.
FINANCE YOUR FRANCHISE WITH THE CANADA SMALL BUSINESS FINANCING PROGRAM
In Canada, there is a major government program that finances a huge amount of franchises. The program is called the CSBF program and finances loans up to 350k on very reasonable rates, terms, and structures. The Canadian government guarantees a huge part of the loan to the participating bank. The program offers business loans with attractive interest rates commensurate with overall credit risk. While franchisees always focus on an interest rate comparison in different financing methods, there should be a realization that your business is essentially viewed by the bank and commercial lenders as a 'start-up.'
Franchise owners seeking bank loans under the government-guaranteed loan program may find the application process potentially cumbersome, and that's why the team at 7 Park Avenue Financial is ready to take over that work from you! A bank loan may only be a part of your overall financing needs if real estate is a part of your purchase that is typically financed separately as part of financing solutions that can be cobbled together to make your purchase successful.
CONCLUSION
Franchisor financing is generally not available, and your franchise fee is typically paid directly to the franchisor and is not financeable as a part of your franchise agreement.
If you want to be a ' high achiever ' in franchising finance success, consider seeking out and aligning yourself with a trusted, credible, and experienced Canadian business financing advisor who will ensure the correct financing options relative to your situation will be explored... And achieved... making you that ' high achiever ' in the explosive franchise industry that is such a big part of the Canadian economy.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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