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Feeling like you may have missed out, or perhaps simply overwhelmed with the ability to finance Canadian franchise opportunities. There are a lot of issues to consider when contemplating a franchising loan, some of which you may not have even considered or be aware of. Oh, and by the way, some of these pertain to those of you who are already franchisees and have even more unique issues to address.
Let's examine some key concepts in franchise financing. Although things have certainly gotten a lot better in the last year or so we are clearly not 100% out of the rough when it comes to the economy and lending perceptions for new and small businesses. Unless you're a master franchisee with the rights to a number of franchises then clearly you are essentially a ' Small Business '. So notwithstanding the great strengths of a proven franchise business model you still face the same issues and challenges of an SME owner in Canada.
Although many current franchisees want to make some changes in their business, as well as having access to the finance required it’s still difficult to achieve that flexibility.
The majority of franchises in Canada are in the ' B TO C ' (business to consumer) model. That is of course heavily dependent on the economy s a whole, and access to the financing you need. If you are a current franchisee you perhaps are in a position to simply tighten up on expenses to meet your overall working capital needs - especially if your business is suffering from a less than adequate location. In some cities in Canada, demographics change, and that can drastically affect your revenues over time. Location is still critical to franchise success if you are in a business to consumer model that we spoke of.
Sometimes the solution to franchise success, if you are a current franchisee, is to ' upgrade ‘and revitalize your location. But what type of financing can in fact help you finance things such as leasehold improvements? The good news is that the same financing program that probably helped you acquire the business is also available for ongoing financing needs. We’re of course referring to the government business loan, aka the ' SBL '. Financing up to 350K can be accessed for things such as leaseholds, new equipment, architectural drawings, etc.
We would caution franchisees that they need to be able to sufficiently prove that any refinancing of the business must make sense in the terms of cash flow repayment. That can be accomplished by a simple cash flow plan with a focus to additional revenues achieved through your revitalization. Don't let lack of capital make you miss Canadian franchise opportunities for new and existing franchises. Ensure that you demonstrate though that you can handle the additional debt service.
There are a lot of issues to consider in financing a new or existing franchise. In some cases you might even be considering the purchase of an existing business from another franchisee.
Speak to a trusted, credible and experienced Canadian business financing advisor for help with the issues surrounding a successful end to your franchising finance loan.
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Stan Prokop 7 Park Avenue Financial/Copyright/2020
