YOU ARE LOOKING FOR A FRANCHISE LOAN!
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Financing & Cash flow are the biggest issues facing businesses today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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It's that time... you're looking for a franchise financing loan for your business purchase in the Canadian business environment. Need franchisee finance assistance? Let's look at what you need to know... and do!
Unlike our good friends in the U.S. the Canadian franchisee entrepreneur has, frankly, somewhat more limited options when it comes to financing their business purchase.
THE ONLY REAL SOLUTION IN CANADIAN FRANCHISE FINANCING - WHERE IS THE MONEY COMING FROM?
While in the United States specialized franchise finance firms abound, along with a number of types of banks that could facilitate your purchase the Canadian borrower quickly finds that not only will his franchisor not provide direct financing .. no surprise there ... but equally as challenging is the fact that only about 4 solutions exist in Canada for your franchise loan.
What you need to do is really focus on your franchisee loan as if you were purchasing any other business, either existing or new, i.e. your franchisee rights and a turnkey solution offered by your franchisor or master franchisor.
BE PREPARED IN FRANCHISE FINANCING - BUSINESS PLAN / CASH FLOW PROJECTIONS
What does that mean? Simply that it is back to the basics, which includes a business plan, the ability to demonstrate some operational skills and mgmt. experience, as well as being able to clearly identify that you can contribute the required ' equity component ' or down payment to your deal.
In finance, there is a term called Sources and Uses ... it couldn’t be more basic... identifying where you will get your funds from, and then clearly itemizing each individual use.
FINANCING NEEDS FOR A FRANCHISE
What are those uses? It's of course :
Franchise fee,
Equipment
Leasehold improvements
Inventory
Working capital and start up costs - A franchise requires ongoing working capital and asset acquisition solutions
In some cases, depending on what franchise you are buying, real estate. Types of franchises vary greatly when it comes to asset investment requirements and what sufficient funds are required to run and grow the business - always a challenge for new franchisees.
DON'T FORGET WORKING CAPITAL FOR DAILY OPERATING FUNDING NEEDS!
The new franchisee is often so caught up and focused on getting a franchise loan that the last thing they are thinking about is short or intermediate-term working capital needs... ie the fuel that will finance the business on a daily basis. It's all those basics, wages and salaries, lease and loan payments, and products and supplies. Naturally many franchises save money as they can capitalize on the buying power of their franchisor in many cases.
WHO FINANCES FRANCHISE OWNERS IN CANADA
So who are the actual franchise lenders who can provide financial assistance in the franchise business industry in Canada? It boils down essentially to
Traditional banks,
Government small business loan - available only through participating financial institutions - term loans with a payment plan that make sense for your financial situation - maximum loan amount available is 350k - Real estate up to 1 Million dollars can be funded under the Canada Small Business Financing Program - Different institutions participate in the program and there are certain key requirements for the loan as well as other factors that might limit your financing - The two key assets funded under the program are hard assets and leasehold improvements
Talk to the 7 Park Avenue Financial team about other conditions of the guaranteed federal government loan program.
Commercial leasing and finance companies
Specialized franchise financiers are independent commercial finance firms.
Franchisors typically do not provide financing for franchise owners/purchasers - Many franchisors have programs established with some lenders and banks, and while angel investors and friends and family loans could provide the funding they are rarely a good options
ENSURE YOUR PERSONAL FINANCES ARE IN ORDER!
A couple of notes about the players we have just mentioned. The traditional Canadian chartered bank rarely finances a new franchise on its own merits when it relates to bank loans specifically for franchises. That is because whether you agree or not the business is viewed as a small business and a start-up, with no proven revenues, cash flows, and profits to substantiate the loan. Is the business profitable or will it be profitable is the key question!
Again, you might think otherwise, but the bank respectfully differs! Business owners should also understand the credit report and the credit bureau score and how it affects loan financing approval and the interest rates tied to your loan. Being up to date on your tax returns and having a reasonable net worth is also important!
Note also that a franchise purchase can also be achieved through the purchase of an existing business franchise with the permission and approval of the franchisor under their franchise
By far the majority of franchises in Canada are financed by the specialized BIL loan that is a government-guaranteed loan. One note is that this loan has a 350k limit, so not all franchises can be fully financed in this manner. Ensure you have a good credit score and a complete business plan in place - 7 Park Avenue Financial prepares business plans that meet and exceed the requirements of banks and commercial lenders
If the specialized franchise finance firm doesn't have a true program arrangement with your franchisor you may also find a lack of interest in completing a transaction successfully.
CONCLUSION - FRANCHISE FINANCING LOAN SOLUTIONS
Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can best assist you in your franchisee finance needs with advisory services and funding solutions that make sense and minimize annual fees or higher financing costs with better decisions around financing.
FAQ: FREQUENTLY ASKED QUESTIONS
Can you get financing for a franchise?
There are many options available when it comes time to find a franchise. You can take out traditional loans, government-backed funding is also available, as are commercial lenders who specialize in these types of facilities depending on what is best suited for the size and needs short term versus long term investment required in starting up a franchise
How can I get a franchise with no money?
You can not start a franchise with no money but partnering with someone who has the capital is an option -If you don't have any cash to work up an investment, consider bringing on family members or old coworkers who are willing and able to be partners in your business venture! Loss of ownership or control must be considered when partnering with another party
