YOU ARE LOOKING FOR A FRANCHISE FINANCING OPTIONS !
BUSINESS LOAN FINANCING SOLUTIONS FOR BUYING A FRANCHISE IN CANADA
You've arrived at the right address! Welcome to 7 Park Avenue Financial
Financing & Cash flow are the biggest issues facing businesses 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
FUNDING YOUR FRANCHISE BUSINESS ACQUISITION
Financing a Franchise in Canada. We're all for ' un worrying ‘, and not panicking, but the reality is that there are some key issues, financial, and otherwise when it comes to success in this entrepreneurial segment of the Canadian economy. And yes, the right franchising loan or combination of loans poses the question - How do I finance my franchise purchase - where is the money coming from?!
Although we’re focusing on franchising finance, there are of course other issues to get ' unworried ' about. They might include your overall personal suitability to be a franchisee in your franchisor's system. Many franchises fail for a variety of reasons, including business experience and poor initial finance choices.
SELECTING THE RIGHT FRANCHISE / FRANCHISOR
Aspiring franchisees want to be able to have a strong comfort level that you have aligned yourself with the right franchisor with your own financial situation. At 7 Park Avenue Financial, we're proudly Canadian of course, but we can't forget that many very solid franchise opportunities come out of the U.S. market based on their organization in Canada.
In some cases you might be dealing with the Master franchisee of a U.S. organization, someone who has simply purchased the rights to the Canadian territory which many franchisors offer - Lucky them!
Note also that direct franchisor financing is almost never available - Franchisors sells franchises - they don't finance them
UNDERSTANDING FEES AND ROYALTIES IN YOUR FRANCHISE SYSTEM
Another key aspect, our third in fact is the structure of the franchise when it comes to franchise fees and royalties. The reality also is that this issue is a key component of financing a franchise. Let's explain.
FRANCHISE FEES ARE TYPICALLY NOT FINANCEABLE.. UNLESS!
Although disappointing to many Canadian prospective franchisees typically the actual franchise fee is not financeable unless you are dealing with a very specialized franchise loan firm or the Government of Canada Small Business Guaranteed Loan Financing Program. This is typically shown as ' Goodwill ' on your balance sheet, reflecting the value of your franchise relationship from a financial perspective.
So make sure to carefully assess your ability to include that part of your business commitment in your total cash flow and cost to acquire the business strategy. The most typical franchisee fee we see when franchises are in the 350k range tends to be $ 25,000.00.
WHAT IS THE ROYALTY RATE IN YOUR FRANCHISE
Right behind the franchisee fee when it comes to addressing our ' worrying ' are the royalty payments that come with your franchise obligation in the franchise agreement. More often than not franchisors typically charge royalties in the 6- 8 % range for franchise owners and are a key driver in your cash flow analysis. That’s a good chunk of your profits if not managed properly.
So, we have covered off 3 key things to worry about when it comes to buying and financing a franchise - your overall suitability to run your own business, picking the right franchisor as a long-term partner, and finally franchise and royalty fees. Franchise lenders also look for good personal credit history and personal credit score and credit report, as well as up-to-date tax returns and financial stability in your overall application profile - as well as hopefully some management or business experience. Bottom line -have your personal finances in order!
FINANCING THE FRANCHISE WITH GOVERNMENT HELP! SMALL BUSINESS LOANS 101 FOR THE FRANCHISE BUSINESS OWNER!
Oh yes... about that financing and meeting potential lenders! In Canada, your business can be financed by a specialized franchise lender, the government via the BIL/CSBF loan program, and a combination of lease and working capital finance options from the non-bank sector. This is our Canadian equivalent of the U.S. ' SBA loans ' that have certain requirements.
"Government grants " don't fund franchises and angel investors or a family member are a poor choice for funding a franchise.
The interest rate on the government-guaranteed bank loans is very attractive and other financing options are available from both equipment financing companies, traditional and alternative lenders - thereby allowing the franchisee to ensure day-to-day working capital is available. The alternative lender will often have less stringent requirements around issues such as personal credit - but working with a large corporation such as a Canadian bank is often desirable.
Talk to the 7 Park Avenue Financial team about which financial institutions or credit unions are appropriate for your transaction and a payment plan that meets cash flow needs.
A complete business plan is a key requirement, outlining cash flow needed to make the business profitable, debt repayment, management experience, etc - 7 Park Avenue Financial prepares business plans for our client financings that meet and exceed bank, commercial lender requirements of other alternative lenders.
Interest rates will always depend on the type and amount of loan you require to start and fund the franchise.
By the way, you can purchase a new franchise or an existing franchise from a current franchisee wishing to sell - naturally, approval from the franchisor is required. It's critical to review the financial history of an existing franchise you are purchasing! Understanding the financials is key to selecting repayment terms for the purchase of an existing franchise. Remember that more money might be needed down the road for working capital or asset acquisition. A franchise requires future marketing support also.
BANK LOANS
Commercial banks in Canada can finance many of those franchise opportunities. Banks typically favour franchises that share brand names or have established financial successes. Choosing to franchise sometimes gives you a competitive edge when it comes to obtaining loans from a bank for the entrepreneur.
CONCLUSION - FUNDING YOUR FRANCHISE PURCHASE / FINANCING NEEDS FOR NEW FRANCHISEES
Want to get unworried about financing a franchise and get a payment term that makes sense for your particular circumstance? Speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can ensure you have access to the right financing options and round out your franchising loan with the right combination of debt and working capital.
Looking for a one stop shop ? Get ' unworried ' today with our advisory services for traditional financing options for small business or an alternative financing option that makes sense for the financial assistance you're looking for to be successful around better decisions around finance. Funding approval will vary greatly with your unique and specific situation.
FAQ: FREQUENTLY ASKED QUESTIONS
Does BDC Offer Franchise Finance?
The BDC offers a variety of financing options to new and seasoned entrepreneurs with very favourable terms. Some programs are targeted at specific demographic groups, such as indigenous Canadians or recent immigrants who want their business venture in clean technology.
Will banks give loans for a franchise?
A traditional loan from the bank is one way to finance your business. A Canada Small Business Loan government-approved lender can provide this type of financing for franchises as well.
Click here for the business finance track record of 7 Park Avenue Financial
