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How To Finance A Franchise In Canada
Franchise Loans in Canada
YOU ARE LOOKING INFORMATION ON FINANCING
A FRANCHISE VIA FRANCHISE LOANS AND OTHER METHODS!
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
BUYING A FRANCHISE?
Financing a franchise in Canada via a franchise loan or other lending arrangement is probably the 2nd largest concern that any potential Canadian entrepreneur has - (we are assuming that picking the right type and size of business is the largest concern?!).
So let’s assume that as a Canadian entrepreneur you wish to either purchase a new franchise or in some cases purchase an existing business that has already been in business and being sold by the new franchisee. There is actually a third scenario also, in that you might already be a franchisee and wish to either purchase another unit or invest in another franchise business within a different industry.
The bottom line though is that after you have made that decision financing of your new business quickly becomes ‘job 1’. The challenge is two-pronged of course –
1. Finance the purchase of the franchise
2. Ensure you have a solid understanding of the long term financing needs of the business from a viewpoint of increased investment required for growth, survival, and continual profitability (A good example is if you are purchasing a restaurant franchise – you should clearly investigate what further upgrades to leaseholds and equipment might be required for you to maintain your franchisee status, or simply to grow your business and stay ‘fresh‘ at the same time).
In Canada you certainly don’t have what we would call ‘numerous' choices to finance a franchise, but there are several what we will call strategies or programs that can assist you to complete financing successfully. We tell clients that we can’t overemphasize the importance of dealing with a trusted, credible, successful and experienced advisor in this area. Just one piece of advice or experience from such a party can save you thousands and potentially save the regret of having purchased the wrong business or having financed it incorrectly.
We recently met with a client who had chosen what we will call for confidentiality reasons a ‘service’ business. The business was financed all through personal equity – that simply means of course that no funds were borrowed. Sounds good so far right, wow... a business with no debt.
Well, here’s what happened, sales didn’t materialize, cash flow dried up, all personal resources, including the sale of the family home, had disappeared. And the business was no longer financeable from a loan perspective because of the poor fundamentals. In reality the business should have been financed with some debt, so that any shortfall in revenues could be augmented with personal resources for a temporary period.
FINANCING OPTIONS
So how are franchises financed in Canada? ask our clients. They are financed via the following mechanisms –
- Owner personal investment
- A special loan guarantee program by the Canadian federal government
- Lease financing for equipment
- Some form of vendor take back in certain unique situations
-Cash working capital term loans to augment the owner investment
In a very small (and we repeat, small!) number of situations the franchisor themselves might provide some financing. This is rare and should never be counted on – for the simple reason that franchisors make their money selling franchises, not holding and financing them.
So let's recap our basic shared information – it’s simply as follows:
Carefully pick a franchise that suits your skills, interests, and financial investment profile.
Ensure you properly mix the right amount of debt and equity – too much of either is rarely a good thing.
Work with a trusted business financing advisor in franchising to ensure you avail yourselves of the proper mix of the 5 methods we outlined above. That’s a successful Canadian franchise financing loan strategy.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop 7 Park Avenue Financial/Copyright/2020
' Canadian Business Financing With The Intelligent Use Of Experience '
STAN PROKOP
7 Park Avenue Financial/Copyright/2024
Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil
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