YOU’RE LOOKING FOR A FRANCHISING LOAN!
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
Suite 301
Oakville, Ontario
L6J 7J8
Financing franchise opportunities in Canada may well be considered an art... or is it a Science. How does the franchisee entrepreneur get on the right track when it comes to a franchising loan? Let's dig in.
NEW AND EXISTING FRANCHISES CAN BE FINANCED
When it comes to financing your new small business franchise (either a new turnkey opportunity or purchasing an existing franchise) it's all about ensuring you are seeking, and have the wherewithal to complete... the right type of financing and business loans you require.
YOUR DOWN PAYMENT / EQUITY COMPONENT
A key factor in that whole process is either the down payment or equity component that will be demanded by either your franchisor, your lender, or in some cases, both will vary greatly. When we talk to clients about franchising loans the down payment/equity they put up is also a sign of their individual comfort level or risk tolerance. Let's explain that one.
While we have noted that your down payment may well be a strict requirement the other two issues surrounding that are the entrepreneur's comfort level with the amount of debt they are taking on. They might view a larger down payment, if possible, as the method to reduce financial risk. It's important to note that the amount of risk around equity and debt that the franchisee is comfortable with is the same situation the largest corporations in the world struggle with also - namely capital structure and leverage.
WHAT AMOUNT OF FINANCING MUST THE FRANCHISEE COME UP WITH?
By the way, that down payment or equity component can range anywhere from 10 to 50% based on the amount of financing you need, where you get it, and the type of loan or loans required to kick start and grow your new business.
DON'T FORGET TO CONSIDER ADDITIONAL FUTURE FINANCING NEEDS AND ASSET ACQUISITIONS
We caution clients also that they must consider longer-term financing issues, not necessarily just focusing on getting the business open. Down the road, new assets may be required, and depending on the type of business you are considering it’s important to look at how you will finance inventory, working capital, and accounts receivables, equipment, and leasehold improvements required to keep your franchise ' up to snuff'.
THE NEED FOR A BUSINESS PLAN
Your ability to demonstrate how you will pay back financing that’s required will essentially always come out of your business plan and cash flow forecasts. They need to be tailored to your overall business model - the lender or lenders in franchise financing arent your new equity partners - they share no upside, just the downside of seeing their loans not repaid. Demonstrating proper cash flow is key! 7 PARK AVENUE FINANCIAL business plans meet and exceed the needs of banks and commercial lenders. Many franchisors might offer some assistance in the info required for a proper plan and projections - franchisees are also encouraged to talk to other franchise owners.
When it comes to repaying franchise loans it's all about sales, so focus properly on realistic sales and breakeven statistics.
HOW DO YOU FINANCE A FRANCHISE IN CANADA
So where does your franchising loan come from in Canada? If it is not from a select franchise specialty lender then another popular finance vehicle is the Canadian BIL loan, which is perfectly suited to finance many franchises. It is attractive in terms of low personal guarantee, equity required, repayment, and by the way, it also finances leasehold improvements and construction if that’s a key part of opening your business. The interest rate on the program is very attractive and terms are flexible when it comes to repayment. Other financing solutions are available from specialty franchise lenders.
Note that the franchisee must pay the franchise fee separately, as this is generally not a financeable part of the transaction under the franchise agreement. Owners should be able to demonstrate a good personal credit score and personal credit history.
CONCLUSION
Take some time to understand what finance offerings are available for a franchise business that suit your particular needs, whether it be in the popular hospitality (restaurant/hotel) area or a service type of business.
If you are focused on owning a franchise seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your franchising loan needs. Get that right combo of ' art ' and ' science' working for your franchise opportunity.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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