YOU’RE LOOKING FOR A FRANCHISE LOAN!
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Financing & Cash flow are the biggest issues facing business today
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Suite 301
Oakville, Ontario
L6J 7J8
Business franchising loans in Canada. Two things come to our mind when it comes to a franchise loan in Canada. First of all, it doesn't have to be complicated when it comes to addressing the sources of financing and getting experienced assistance in completing your finance.
Secondly, as in any aspect of a business ' doing it right ' has a lot of benefits. More so for the entrepreneur who wants to be successful in either the turnkey franchise he or she has opened or perhaps bought from an existing franchisee or franchisor. Let's dig in!
When it comes to borrowing for a franchise business it’s a question of not over-borrowing, but at the same time getting the right amount of capital you need. Franchisees that have an ' all cash ' business - i.e. in the hospitality/restaurant area have a bit of an advantage because their working capital needs are more limited. Franchises selling to clients in a B2B (business to business) environment have to think of addressing the same issues as any other company in Canada - i.e. how to I plan for financing receivables, inventory and future capital cost needs?
Franchise sizes, in terms of cost to purchase, range anywhere from 5k to the millions of dollars. That's quite a spread - and the franchisee should be prepared to put in anywhere from 10 -50% from an owner equity / down payment scenario.
It's important to ensure you have the personal capital to invest in the franchise - both your franchisor and your finance partner/partners will want you to prove your ability to demonstrate that you can meet the required equity requirements. This is typically easily accomplished by providing your franchisor, and lender with a completed ' PNW ' - Personal net worth form that shows the make up and liquidity of your personal assets.
Also, it is difficult, if not impossible to finance certain intangibles such as the franchise fee itself - so that typically comes from the owners pockets.
Knowing the types of financing available and who offers this finance will uncomplicated your pursuit of financing. If you are not dealing with a ' Specialty ' lender whose sole focus is franchise finance then a logical other alternative is the SBL / BIL loan program that is supported by Industry Canada.
Financing you need will typically be in the form of a term loan and potentially an overdraft/line of credit. Many hospitality type franchises finance their future sales through innovative' merchant advance ' type loans, although they come at a higher financing cost.
Business franchising loans get really uncomplicated if you have a slick, clean loan financing package. Key elements are a business plan, cash flow, info on yourself and the franchisor. Other miscellaneous requirements are in fact the same as any other type of financing sought by businesses.
Remember that the franchise lender, unlike you, doesn’t share ownership and profits. Their goal is a lot more simple - getting paid from your profits and cash flow - so demonstrate that repayment clearly in your work.
We repeat – the franchise loan process in Canada is as complicated as you make it – it certainly doesn’t have to be with proper knowledge and assistance. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with franchising loans that suit your individual needs.
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Stan Prokop 7 Park Avenue Financial/Copyright/2020
