YOU ARE LOOKING FOR A FRANCHISE LOAN!
HERE ARE YOUR OPTIONS FOR FINANCING 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 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
Oakville, Ontario
L6J 7J8
Yes, you're looking for a loan for a franchise, but who in fact is lending for franchising finance in Canada and what are the criteria. Is there a way to ensure you have access to all aspects of franchisee loans? Some good questions - let's explore some even (hopefully!) better answers.
THE FRANCHISE INDUSTRY IN CANADA IS BOOMING AGAIN
A few years ago as the Canadian franchise industry (and all businesses in general) recovered from the global financial crisis it probably was the worst time even to seek franchising loans. But the dust has settled, the Canadian economy seems to be firing on all cylinders, and the only question you as a franchisee want to know is ' where's my loan approval'?
BANKS FINANCE VERY FEW FRANCHISES DIRECTLY
While Canadian banks promote actively that they support franchises in Canada the reality is that quite often, in fact almost always! ... they don’t do this directly. That probably simply comes from the fact that in many aspects franchises are viewed as a start-up in nature - notwithstanding the proven business model and brand you as the franchisee have bought into. So that means from a fundamental finance point of view that there are no strong opening balance sheets, historical cash flows, and proof of profitability. In essence, you're a start-up... and start-up financing is hard to find.
A MAJORITY OF FRANCHISES IN CANADA ARE FINANCED VIA AN SBL LOAN
So how in fact do the banks finance franchises? The reality? They do it under the auspices of the BIL/CSBF loan program, which is a government guarantee to the bank for the majority of the loan. The interest rate and business loan flexibility of this program are extremely desirable for entrepreneurs considering buying a franchise. A good personal credit score is required for almost all business loans, government or not! Personal finances for a new franchise or even a used franchise should be in order re: net worth documentation, business experience, etc . Typically the franchise fee itself is not financeable under the program as franchise fees typically are funded by the franchisee in almost all franchise funding scenarios.
3 OTHER SOURCES OF FRANCHISE LENDERS
There are of course other sources of franchise loans. They include:
Specialized franchise finance organizations,
Private commercial finance firms,
Equipment finance firms that will finance certain hard assets associated with your business.
The key aspect of getting approved for financing under the Govt loan program is your ability to find an experienced banker who is both familiar with the program and can help you identify the key requirements of the loan. Another method in which you can address this ' search issue ' is to seek out a trusted, credible and experienced Canadian business financing advisor who has the established relationships and knowledge to fast track approval success. The type of financing you ultimately choose will vary greatly based on amount and overall lender desirability of your purchase.
In the U.S., which has a similar program almost 25% of all loans made under their program are for franchises, and we think that's probably a similar if not larger number in Canada. So if your competitors are getting franchising finance, why shouldn’t you... right?
CONSIDERING A MASTER FRANCHISE OPPORTUNITY
If you are buying a master franchise or have multiple locations in mind various other options might in fact be available - for example assistance from a private equity group, etc. But the reality is that one individual franchise will never qualify for this type of financing participation.
YOUR FRANCHISEE DOWN PAYMENT / EQUITY PART OF THE TRANSACTION
The equity, or down payment component of a franchise loan is critical - It can be anywhere from 10-50% and it’s a fine line that has to be managed relative to the amount of personal funds you commit and where there will come from - i.e. collapsed savings, collateral mortgages on your home, etc, Remember the saying ' once you spend it, it's gone! ‘which we caught recently. Ensure you have a proper business plan in place that accurately reflects the business potential and cash flow and working capital needs of the franchise - at 7 Park Avenue Financial we prepare franchise business plans for our clients that meet and exceed lender requirements - Canadian banks refer clients to 7 Park Avenue Financial for business plan preparation.
CONCLUSION
The reasons you want to get a loan for a franchise are quite clear – owning a business, financial independence, etc. Accessing the right type of available finance for that entry into entrepreneurship is critical. Seek out and talk to an expert in franchising finance options.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
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