YOU ARE LOOKING FOR A FRANCHISE LOAN!
BUSINESS LOANS FOR NEW FRANCHISEES IN CANADA
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
A franchise business loan in Canada. We challenged ourselves recently to come up with some ' stupid' questions on financing franchises in Canada. Actually, it turned out to be not that hard. No one would ever ask these questions, would they? We're hopeful they wouldn’t but there’s a lot of misinformation around these days. So let’s dispel some serious fallacies around financing your business as a franchisee entrepreneur. Let's dig in!
WHY DO YOU NEED TO FINANCE A FRANCHISE FROM A SMALL BUSINESS PERSPECTIVE
Question # 1 - ‘Do I really need to finance a new franchise. Can I just pay cash or collapse my savings, registered, investments, or put a collateral mortgage on my house. That's what my banker recommends.
Answer - We suppose that you could pay your franchisor the full amount per your banker’s request. But why would you honestly do that? You incorporate as a franchisee to separate your business life from your personal life. That limits your liability to the assets of the franchise, aside from any personal guarantees. There’s a whole world of financing help out there when it comes to financing your business - specialized franchise finance firms, leasing companies, working capital solutions, even private equity firms in certain circumstances. Don't risk your personal financial assets if you can properly finance a franchise with rates, terms and structures that make sense. Your personal good credit score goes a long way to being successful in funding a franchise. The current low-interest-rate environment certainly helps the cause also. In some cases, real estate might need to be a part of the acquisition process.
P.S. You might want to remind your banker that the Canadian SBL/BIL/CSBF loan program is in fact one of the most popular methods of financing a franchise via a bank. Or is it that they don’t want to do the extra work that’s required to complete one of the best loan facilities in Canada for a franchise. The Government Small Business Financing Program loan is somewhat similar to the U.S. ' SBA' loan. Interest rates are low and competitive under this loan, as well as repayment terms being flexible. Generic traditional bank loans structured as a term loan are often challenging to complete.
ARE BUSINESS PLANS REQUIRED?
Question # 2 - ' I know what I am doing; I don’t need to spend time or pay for a business plan, do I?
Answer - Business plans, whether they be detailed or in executive summary format are required for all commercial lending opportunities when it comes to buying a business and becoming franchise owners in one of the largest and fastest-growing segments of the economy. They also later serve as a management tool to measure how well you are doing compared to your original financial goals. It's one of the best scorecards you can have when done properly. If you don’t have the time or financial expertise to prepare a business plan seek the advice and help of a Canadian business financing advisor. At 7 Park Avenue Financial plans and projections we prepare for our clients meet and exceed the requirements of all lenders.
WHAT ADDITIONAL FINANCING IS REQUIRED TO BE SUCCESS IN FRANCHISE FUNDING
Question # 3 - ' Once I finance via a franchise business loan I don't require further financing, right?"
Answer - While many types of franchises are in fact cash flow positive from day one certainly not all come under that category and that will vary greatly based on your investment and the type of business you purchase. Even the franchise fee itself can be a significant amount of your required capital. So you need to spend some ' financial time ' in two areas - the early days of the franchise when more is going out than coming in, and secondly for long term growth and replacement of assets or leaseholds that might need updating. In some cases, your franchisor may in fact insist that certain assets and leaseholds be updated/replaced. So don’t forget to factor in ongoing working capital needs which can often be identified through your business plan or a cash flow forecast. Ensuring your know the type of loan you need is critical, as sometimes different types of financing are cobbled together to give you a final solution.
In summary - don’t let the challenge of financing solutions for funding franchises become a major hurdle in your success as a franchisee. The research and effort you put into picking and checking out a franchise and signing the franchise agreement should continue in the financing process in selecting financing options.
Your franchise purchase is a major life decision. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your franchise business loan project.
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