Financing A Franchise Business - Franchising Lenders For Your Busienss Purchase In Canada With The Right Franchising Lenders

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FINANCING A FRANCHISE PURCHASE IN CANADA

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Financing & Cash flow are the biggest issues facing business today

ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?

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Financing a franchise business in Canada requires in our opinion a certain measure of 'good behaviour' when it comes to dealing with franchising lenders and financing your business purchase.

FRANCHISE LENDER EXPECTATIONS

What do we mean by that? Well, 'behaviour ' in the sense that it’s important to understand where your lender/lenders are coming from vis-a-vis their expectations on your transaction and what they expect. In our opinion, once you have a certain measure of respect and understand the requirements and some of the lender psychology behind the transaction you'll be better off. And by 'better off' we of course mean your chances of final approval increase substantially.

Most franchisees in Canada quickly realize that after they have made the decision to purchase a business within the Canadian franchise environment that they don't have all the capital to complete a transaction themselves. They require financing of some sort. That's when they typically start talking to financial sources and often seem overwhelmed around the requirements they might be asked to fulfill to complete a transaction.

THE PERSONAL GUARANTEE

Even the personal guarantee can often become an issue with the franchisee applicant. And that leads to thoughts about whether in fact a personal guarantee is in fact always required on a franchise transaction.

Although you might assume that the franchisor and lender might be working hand in hand on your transaction this is rarely the case, certainly in any direct manner.

What your franchisor can do however is to provide some measure of guidance on how other franchisees have in fact completed transactions within their chain. So whether you go to a bank, a private commercial financial institution, or one of a myriad of independent finance firms who can assist you we can categorically say it's up to you to do your homework on the requirements for financing.

THERE IS NO 100% FINANCING IN CANADIAN BUSINESS

So, where are those franchise lenders coming from when they are looking for a bit of respect and good behaviour around their requirements? A good start is simply to understand that no franchise in Canada is financing on the 100% OPM principal. OPM is of course 'other people’s money'. So you need to understand the lender had an immediate expectation that you are bringing a down payment/equity scenario to the table. At 7 Park Avenue Financial we are often asked if the franchisor franchise fee is financeable and generally ... it is not !

PERSONAL NET WORTH, CREDIT HISTORY ARE IMPORTANT

Unless you are getting direct financing under the government small business loan you should be totally prepared to provide good disclosure on your personal net worth and credit history. While the majority of franchises, in our opinion, are financed under the Government SBL loan program the reality is that also requires a decent personal credit score and financial history and solid evidence of net worth commensurate of course with the size of the franchise you're purchasing. Better credit scores will help you drive the best interest rate scenario on your financing.

PREPARE A BUSINESS PLAN AND CASH FLOW FORECAST

Credit and character go hand in hand so the expectation from franchising genders is that you got some solid business or industry experience and that you present yourself properly during your submission process. This includes having a crisp, solid business plan for your new business, as well as other standard supporting documentation required when you're financing a franchise business in Canada and soliciting the best franchise options.

CONCLUSION

So, is there a bottom line? If there is one it’s pretty common sense oriented... namely understand where lenders are coming from in their requirements to franchise your business and your ability to professionally supply that info, and understand why they require that information will go a long way towards franchise financing success.

Remember also you need to address working capital and cash flow financing options after you acquire the franchise! Note that you can finance a new franchise or purchase an existing franchise from the franchisor or another franchisee who is selling ( Be sure to find out why they are selling !)

Speak to a trusted, credible and experienced Canadian business franchising advisor for assistance with your franchise proposal, with a focus on success!