YOU’RE LOOKING FOR FRANCHISE FINANCING ASSISTANCE!
FRANCHISE LOANS FOR YOUR FRANCHISE BUSINESS PURCHASE
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
Success via a profitable franchise is of course the dream of every franchisee entrepreneur when he or she is seeking a franchise loan. While most would agree that nothing is ' guaranteed' in business profitable franchises within growing industries certainly provide a strong level of comfort to the borrower looking for financing solutions. Let's dig in.
IDENTIFYING CASH FLOW AND PROFITS IN YOUR FRANCHISE APPLICATION
When applying for a small business franchise loan (these are done via a specialty lender or under the BIL program in Canada) the concept of profits as they relate to cash flow and loan repayment is key. These business loans are term loans tailored to your specific repayment capabilities with attractive interest rates - the interest rate is benchmarked of the Bank prime rate in Canada.
PLANNING IS A KEY PART OF YOUR FRANCHISE FINANCING SUCCESS
In the case of a turnkey situation, the franchisee and the lender of course will rely on the business plan and cash flow projections of the borrower. Loans are repaid from cash flow; it’s as simple as that. So your ability to project reasonable success in a business plan and cash flow statement is key. Franchise purchasers should also ensure they can demonstrate a positive credit score and personal credit history. Interest rates, in general, will not vary greatly in franchising loans but the good credit of franchisees is always important when you explore finance options available.
YOU CAN PURCHASE AND FINANCE AN EXISTING FRANCHISE
We often meet with clients who are looking for a bit of a different story when it comes to a franchise loan. That story? They either wish to purchase an existing franchise from a current operator or, in some cases wish to complete a partnership buyout. (Partnerships are difficult!)
REFRANCHISING !
In the case of ' refranchising ' - i.e. the purchase of an existing location it’s critical to get a strong handle on the current financials of the business. If in fact is a predominantly cash business ( a huge percentage of franchises are ) it's critical to understand what happens to cash ( !), is cash being reported and recorded properly, and if it's sufficient to repay both existing and new debt. One tactic we've used successfully over the years is to ensure we are provided with 3 months of bank statements and credit card transactions to allow us to see the inflows and outflows of cash.
APPRAISALS MIGHT BE REQUIRED FOR ASSET PURCHASES
Again, staying with the idea of purchasing an existing business, it’s critical to get an appraisal done on the existing assets and leaseholds. These will form the basis for any term loan refinancing, and you want, as a prospective buyer to get a handle on current values, replacement values, and liquidation values. Those are of key interest to your lender also.
Note that in general the franchise fee itself cannot be financed and that is usually paid by the franchisee directly. Franchise owners should familiarize themselves with the application process and what can and cannot be financed .
DON'T FORGET TO ACCOUNT FOR FUTURE WORKING CAPITAL NEEDS
Many franchisors these days will mandate ongoing replenishment of leaseholds and assets to keep the business ' fresh '. That’s why your business plan and cash flow projections (if you're not in a service business) should account for ongoing asset upgrades as needed. Business owners, when they open a franchise often don't take into account future business capital needs they might require. In some cases real estate can be part of a transaction, and that is usually handled separately via a bank loan or commercial mortgage, depending on the type of loan required.
FINANCING LEASEHOLD IMPROVEMENTS - YES YOU CAN!
Leaseholds are difficult to finance and they are in many cases best-financed via the Government SBL loan which allows for this type of financing. (It’s difficult for many lenders to accept ' fresh paint' as collateral for your loan!)
PREPARE ACCURATE AND CONSERVATIVE FINANCIAL PROJECTIONS
Your business plan and cash flow is often best when you approach it as a living document - using it to answer basic questions of profitability, cash flow, reasonable growth, etc. We recommend that down the road the franchisee revisit the plan as a useful template to track financial and personal goal success.
CONCLUSION
Opening a franchise for your franchise purchase is the entrepreneurial dream in Canada - i.e. running Purchasing a franchise in a sector that has a strong chance of profit is part of the winning combination of franchising in Canada. The properly constructed franchise loan and financing plan will help guarantee this success. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can help you achieve that guarantee.
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Stan Prokop
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