Franchise Financing in Canada does not come with unlimited options with respect to strategies, amounts, and different rates, terms, and structures.
If you ask a Canadian entrepreneur and prospective franchisee what kind of financing he or she is looking for they would normally simply indicate they want their financing approved, they don’t really focus on what type of financing is achievable in the Canadian marketplace.
When we meet with prospective franchisees looking for financing we discuss both traditional and some non-traditional methods of financing their new venture.
Naturally most business owners prefer 'debt financing' or borrowed funds, as the preferred financing solution - taking in partners or outside equity, angel investors, etc. have all sorts of complications - the bottom line is that non debt alternatives force the entrepreneur to give up substantial equity and control, both of which are too valuable in early stages of building a business.
GOVERNMENT GUARANTEED LOANS FOR YOUR FRANCHISE?
So that brings us back to - How are franchises financed in Canada?The main financier of franchises in Canada, and it's probably a surprise to most people, is the Canadian government. The federal government underwrites the CSBF loan program that the vast majority of franchisees utilize to complement their own investment. We can’t overemphasize that the business community, i.e. banks, lenders, etc look to yourself as the franchisee to put some level of your own investment into the business.
When full financing has not been able to be achieved by the CSBF loan then our firm has been successful in putting together working capital term loans, lease asset financing, etc, to round out the financing package.
Franchisees use funds to buy a first time franchise, expand another unit under their franchise agreement, and purchase an existing franchise from another owner. In many instances franchise financing is required to upgrade a current franchise with respect to leasehold improvements to the facility, asset upgrades, etc.
Franchise financing doesn’t happen over night, many franchisees, or potential franchisees are disappointed with the timing of financing if they find they have entered into financing discussions too late in the game. We also encourage franchisees to enlist the services of a trusted business financing advisor who has knowledge, experience, and credibility in the field of franchise financing in Canada.
It is strongly recommended, in fact, quite frankly, it’s required, that a detailed business plan be put in place to facilitate the approval of the financing. This plan should emphasize the background of the franchisee, the business opportunity, and the growth and profit potential of the business model. If business owners don’t feel capable of preparing such a document we often work with them,
CONCLUSION
Franchise financing in Canada - it's available, it's not complicated! Just plan early and use an expert to guide you through the process.
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' 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
