What Types Of Loans Are Available For A Canadian Franchisee When Financing A Franchise ?

Successfully Navigate Franchise Finance in Canada



Information on financing a franchise in Canada . Does a Canadian franchisee have options when it comes to types of loans and finance that are available ?



What types of loans can a franchisee in Canada expect to attain when he or she is financing a franchise in the Canadian market? Even more importantly how do you qualify and access that financing?

Those are typical questions clients ask us all the time , so lets examine some critical info that will allow you to be successful in completing a franchise finance acquisition.

A good way to start is to build up a bit of a ' checklist ' on what you need to both investigate a franchise opportunity, as well as to present a finance proposal for that opportunity.

We add also that you have the option of course of purchasing a franchise from an existing franchisee, or working directly with the franchisor on a new unit acquisition. There is a big difference in purchasing an existing franchise for a number of reasons, some good, some not so good. First of all an existing unit of course allows you to independently validate the financial results and assets of that business, that’s a good thing. Your accountant, a Canadian business financing advisor, lawyer, or appraiser can assist in various ways to validate the true value of your purchase.

When you are financing an existing franchise it is important to ensure you are completing the transaction as an ' asset sale ' as opposed to a ' share sale '. It is extremely difficult, if not impossible to finance a share sale arrangement.

When you are financing a franchises types of loans dictate what will be financed and how. The key aspects of any franchise acquisition revolve around the following: the franchisee fee, the royalty arrangement, equipment, leaseholds, and sometimes forgotten ' working capital ' to ensure the future growth and health of the business.

If your franchise requires that you have physical leased premises it is critical to ensure that the term of the lease for those premises will at least match the term of the loan financing you are hoping to achieve. Simply speaking, a franchisee can’t get a 5 year loan for a business that has a one year lease! Makes sense, right?

Prior to starting to focus on the financing of your new business and life as an entrepreneur you should of course have completed what the legal and business folks call ' due diligence ' on your franchisor . That might include references from another franchisee, whether they are compliant with franchise regulations in Canada how royalties are paid and structured, etc. The bottom line? There are a lot of rights (and obligations) for you and the franchisor... ensure you understand wha they are.

As we referenced earlier start up capital and final approval can be challenging if you are not well armed with info and resources. In Canada the banks and some other institutions, (but mostly the banks) are the ' approved lenders' for the government BIL/CSBF program.

The vast majority of franchises in Canada are financed under this program. You would be totally missing the boat if you did not at least investigate why this program is one of the best methods of financing a franchise in Canada. The simple reason - just that it has great rates, terms, structures, repayment without penalty ability, and yes, even a low personal guarantee or ' covenant ' requirement.

Maximize your financing potential as franchisee by speaking to a trusted, credible and experienced Canadian business financing advisor who can help you navigate a path to entrepreneurial financing success.




Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com


Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing .Info re: Canadian business financing & contact details :


http://www.7parkavenuefinancial.com/financing_a_franchise_types_of_loans_franchisee.html

New Franchisee? How Franchising Lenders work in Canadian franchise finance

Being the ' new person ' is not always beneficial, especially when it comes to a major life decision such as your new career as a franchisee in Canada. Not knowing about franchise finance or franchising lenders work is definitely a set back - so lets get you ' armed and ready ' with some solid info on financing your franchise .

First of all, here’s the good news - financing a franchise in Canada is certainly possible - It’s mostly done by a guy named BILL! And we're not kidding. More about him later.

In fact though, the franchise industry is currently viewed as quite healthy as lenders feel that the concept of proven business models and branding of your franchise are great steps to opening what ultimately is a ' start up ' business. Clearly we all agree a franchise ' start up ' is steps ahead of opening up your own business and ' taking a chance'.

So, can you get a ' standard’ bank loan to complete your franchise finance? We don’t want to be too sarcastic here, but the answer is, yes, if you have a million dollars net worth, pristine credit, and some outside collateral and guarantee ability. So what we are saying, putting that sarcasm aside, is that conventional lending doesn’t really work if you're a new franchisee seeking an independent business opportunity financing.

So, that brings us to our friend BIll, remember we told you he finances most of the franchises in Canada. Clearly a popular guy, as he finances millions of dollars of franchises. Our clients want to immediately get to know this Bill guy. So, who is Bill?

Actually we have spelled his name wrong, its BIL, because that is the name of the government sponsored loan programme in Canada (in the U.S. it’s called the SBA loan) that funds most franchisees in Canada.

How can one program be so popular? It's simply because it’s well suited to what you are trying to accomplish. It provides great rates, terms and structures, limited personal guarantees, and requires what we in our firm call a reasonable or decent personal credit history. I.E. You don’t need that million dollar net worth we spoke of earlier?

So how do you achieve franchise finance success with franchising lenders on the BIL loan? Again, pardon our humor, but investigate the Boy Scout motto - Be Prepared!

The essence of approval for your franchisee venture for franchising lenders under a BIL loan is a crisp business plan, a financial projection that makes sense, and various back up documents as required by the program. Naturally you also need assistance in determining who offers this loan program, how it can be sometime augmented with other financing, and it sure helps if you present it professionally and properly.

So, we always try to have a bottom line, and in this cases its pretty simple - investigate the BIL program, do your homework, identify key requirements, and, if you are challenged by any of the above seek a trusted, credible, and experienced Canadian business financing advisor who can help you achieve franchisee franchise finance success with the right franchising lenders for your BIL. And, by the way, congratulations on your new role as a Canadian entrepreneur!

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Stan Prokop - founder of 7 Park Avenue Financial -

http://www.7parkavenuefinancial.com

Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 7 years - has completed in excess of 50 Million $$ of financing for Canadian corporations .Info re: Canadian business financing & contact details :

http://www.parkavenuefinancial.com/franchise_finance_franchising_lenders_franchisee.html