Franchise Financing In Canada - Solutions For Canadian Franchisees

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Franchise financing in Canada continues to grow in the franchise sector of the Canadian economy. More and more Canadian business owners and new entrepreneurs feel that acquiring a proven business model and concert will help them achieve personal and financial goals; Franchise owners are looking for help in financing their entrepreneurial dream.

In some cases, a Canadian entrepreneur may feel that he has a valuable business concept and is, in fact, looking to expand the business model utilizing the franchising concept.

It clearly is important for Canadian business people and entrepreneurs to understand the franchise financing environment, as the financing solution regarding their business is key to overall future success.

We, therefore, recommend that you seek and discuss your financing needs with a trusted, experienced and credible franchise financing advisor. The key benefit of such a relationship is simply allowing you to understand your options and ensure the right financing strategy is put in place.

Remember also that you not only require the initial financing to acquire and/or build your franchise, but you need ongoing financial support concerning a business credit line, miscellaneous commercial banking type services, etc.

When we meet and sit down with potential franchisees who seek our assistance in financing, we focus on the immediate need and, as noted above, long-term needs that will, of course, guarantee the viability of the business.

In Canada, most franchise loans are done under the auspices of the government CSBF program, which provides financing up to $350,000.00 in most cases. This loan needs to be properly structured to ensure it meets the cash flow needs of your new business, concerning rate, term, and any special structure. In some cases, we have structured the term of these loans to be in the ten-year range, but quite frankly, our initial work with the owner suggests that the loan can usually be paid off in 5 years, sometimes seven years.

FRANCHISE LOAN OVERVIEW

Let's take a quick look at a $250,000.00 loan based on current 2020 interest rates as it applies to an initial franchise loan.

Therefore you can see, as per above, that your business will have $1200.00 more a month in cash flow and working capital if you opt for a longer-term. All business people know, of course, that the sooner you will be able to reduce your franchise debt and build equity will assist you in greater financial success for your franchise.

So what are the key financing options relative to acquiring the business? First of all, you need a solid business plan that should be prepared by yourself or with the assistance of someone who is experienced in preparing such a plan.

When customers come to us with financing requests for franchises, we clearly explain that a business plan is key to acquiring the right financing. One of the things that some people don’t understand is that the business plan helps to ‘flush out, ‘so to speak, the numbers. It will show your projected sales and profits and cash flow, out of which we build the financing strategy.

GOVERNMENT LOANS FOR FRANCHISING

The benefits of utilizing the CSBF loan program for franchises are that it covers, in many cases, up to 90% of the assets and leaseholds you need to finance the business. Many business owners don’t understand the requirement to ensure that ‘soft costs' are covered by either the business owner or some other alternative financing tool such as a business working capital loan.

By soft costs, we mean items such as the franchise fee, pre-payments to landlords for rent, etc. In our experience, the owner’s initial equity in the business covers a lot of those soft costs.

Our own experience in franchise financing is such that we have found that it is best to ‘cobble together ‘a total financing solution made up of several different financings, all of which allow you to reach your ultimate financial goal. Generally speaking, those solutions are the CSBF loan, a working capital term loan, some lease equipment financing, as well as your own owner equity investment.

CONCLUSION

In summary, business owners should plan properly for a solid financing strategy around their new acquisition. Whether that acquisition covers a new franchise or a purchase of an existing franchise, work with 7 Park Avenue Financial, a trusted financing advisor who can steer you through the options that best suit your needs and will ensure growth, profit, and success.

Click here for the business finance track record of 7 Park Avenue Financial.

' Canadian Business Financing With The Intelligent Use Of Experience '

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

Franchise Financing In Canada | 7 Park Avenue Financial

FRANCHISE LOAN OVERVIEW

GOVERNMENT LOANS FOR FRANCHISING

CONCLUSION