YOU’RE LOOKING FOR A FRANCHISE LOAN!
SMALL BUSINESS LOANS FOR ACQUIRING FRANCHISES
THE WORLD OF LOAN APPLICATIONS FOR NEW FRANCHISEES
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
Franchise financing basics in Canada. Is there a ' boot camp ' we might be able to attend to learn more about ‘successful’ franchisee finance solutions in Canada? Found your perfect business model and ready to join business owners in franchsiing? We're giving you free admission and information on investing in a franchise - so let's dig in!
THE SEARCH FOR FRANCHISE LOANS
Boot camp. It's really a place where people go to learn some basic skills we're told, and so it’s a good analogy for the Canadian entrepreneur and would-be franchisee searching for financing options for their business. By this time the franchisee has hopefully been accepted by the franchisor and has also reviewed the franchise disclosure document and franchise agreement.
DO BANKS FINANCE FRANCHISES? SPOILER ALERT - MAYBE/SOMETIMES!
While our great Canadian banks have some great commercials and websites around franchisee financing support and bank loans in Canada , in fact, it's very rare they would finance a tier 2 or tier 3 franchise directly - so, so much for that commercial around your new franchise. They are very quick; we would point out, to finance the tier one franchises that are huge ' brands' with a very limited chance of business failure. (HINT - Think hockey player/donuts or Clown/hamburgers... ' Billions served').
BUYING A NEW OR EXISTING FRANCHISE
So what then must the franchisee do to locate the appropriate financing for a new turnkey or existing franchise? Franchises can be purchased and financed when they exist already because the franchisor is converting a corporate store to a franchise, or an existing franchisee has permission to sell the business to you. Another Hint - Don't forget to check out why he or she is selling!
FUNDING SOLUTIONS FOR FRANCHISES
So it's back to our entrepreneur searching for the franchise loan that makes sense for their business. Some key fundamentals need to be in place to source the small handful of financing solutions available in Canada in this industry. By the way, they are great solutions; they are just limited so you as a franchisee have to know what they are and who offers them. Occasionally the franchise may also have a real estate component which is often handled separately as part of the new business purchase.
APPLICATION CRITERIA FOR FRANCHISES
Prior to entering the door to franchise lending, a few fundamentals must be in place. The entrepreneur/business person must ensure they have a reasonable personal credit rating as well as the resources to muster a down payment or equity contribution in the business. That ranges from anywhere from 10-50% based on the type of franchise you are buying, the amount of financing you need, the perceived risk in the transaction, or simply the requirement that certain franchisors place on franchisee equity contributions. Borrowers should have a reasonable net worth and a good personal credit score / credit history as a key component of the loan application - A copy of your credit report or score is recommended.
YOUR DOWN PAYMENT
While sometimes the franchisee might feel that the down payment requested is onerous it's often driven by the franchisor's experience in the amount of capital required to make a franchise successful. Certain industries carry a lot more risk than others from the lenders and franchisors perspective - a good example is hospitality. Borrowers will often tap into home equity for a part or all of their down payments, including the franchise fee.
DON'T FORGET WORKING CAPITAL AND ASSET REQUIREMENTS AFTER YOUR PURCHASE
We see a lot of clients initially spending all their time focusing on getting initial financing for their franchise, often forgetting that down the road they will need working capital, new assets, and potentially leasehold refurbishment to stay competitive. A business line of credit might be required for day to day operations.
NO BUSINESS PLAN? NO FRANCHISE
Don’t forget also you absolutely must have a solid business plan, cash flow forecast, and some level of management or business experience related to your new venture. 7 Park Avenue Financial business plans meet and exceed the requirements of banks and commercial lenders.
SOURCES OF FINANCING
Have we forgotten anything? Oh yes, it's actual franchise finance solutions!! They include the one or two specialty franchise finance firms that provide turnkey financing. The other popular and more attainable solution is utilizing the Government small business loan which is perfected suited to franchisee finance as it covers assets and leaseholds required to get your business going. This is the Canadian version of U.S. sba loans.
CONCLUSION
That’s the boot camp overview for your potential franchise business. Make sure to seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with franchise financing basics that makes sense to achieve successful entrepreneurship in the Canadian franchise industry which is such a key part of our economy these days.
Click here for the business finance track record of 7 Park Avenue Financial
Stan Prokop
7 Park Avenue Financial/Copyright/2021/Rights Reserved
