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They usually always start with only one question. Who is 'they? It's clients with that age-old question 'How hard or difficult is it to get a business loan for a franchise in Canada these days?' They of course have made one of the biggest decisions in their lives/ careers, vis-a-vis becoming a franchisee in this booming industry - now the only problem is ...'What type of franchise lending and funding is available?'
Well, we'll share with you some tested and proven strategies around franchise financing in Canada, focusing on completing a successful transaction in a minimum amount of time, with a finance plan that works for you, not just the lender!
On its own franchising has somehow become an industry with a strong and viable reputation. It, like all industries, was hammered hard during the 2008-2009 recession; but it has bounced back strongly, even more so than many other industries.
So, it becomes a simple two-part question then, can you get a franchise loan these days, and more importantly, how?
There are some key factors to consider, one of which is simply aligning you, hopefully with a strong franchisor. So once you have made the decision to partner with a franchisor (we use partner because we think they need you as much as you need them!) you only need one thing. What's that one thing?
It's a 'package'. By that we of course mean that you need a solid little package that convinces both the franchisor and of course more so the lender that you are equipped, from a financial and planning perspective to be a winner as a franchisee.
So what are the key elements of a successful winning plan? It's really pretty basic stuff, and in our experience, many good franchisors have already done a good job of helping you prepare for this. Those key elements are as follows - an overview of your own background and experience, an overview of the franchisor's business (it's your new business too, by the way!) and a solid financial plan that demonstrates two things: how you will make money, and of interest to the lender, what type of cash flow you will have to repay the loan!
It’s a bit of misinformation when franchisees come to us having assumed the franchisor helps them get the financing. Some do assist in a mild sort of way, but we can assure you that you're on your own when it comes to achieving final success.
So the question then becomes how do you get prepared and qualified? Answers as follows! Get working on that business and financial plan we talked about. Identify the amount that you can contribute to the business, essentially your 'owner equity', with the rest coming from your loan or loans. Typically a minimum of 10% and up to 30-40% is required.
It's always helpful to know how the last guy succeeded, don’t you think. In reality, the largest percent of franchise financing in Canada is done via a government-sponsored loan that’s formally called the BIL/CSBF program. Why that loan, and why you should investigate it? Some great reasons are 5-7 year payback terms, great market interest rates, no prepayment penalties, and you don’t even have to personally guarantee the full loan. Is there a better deal in town? Maybe, we just haven’t found it.
We also hasten to add that for any type of business loan, and certainly in franchise lending, the funding and approval of your loan assumes you have a reasonable personal credit history.
So, want to get with the program? Speak to a trusted, credible and experienced Canadian business financing advisor who can assist you to meet your franchise funding and lending needs, today!
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