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Canadian Franchisee Financing & Getting The Right Finance For A Franchise - Possible In Today’s Economy? Here’s how!

Guest post by: Stan Prokop

Article Overview: Information on franchisee financing in Canada . Become a do it yourself expert in solving finance for a franchise . A how to with some expert help!

Canadian Franchisee Financing & Getting The Right Finance For A Franchise - Possible In Today’s Economy? Here’s how!

Is financing or the lack of knowledge of who to turn to holding you back on completing your dream or vision of finance for a franchise you have chosen? The ' how to ' in franchisee financing in Canada is not as hard as you might think. Let's examine a solid ' battle plan ' and the ' lay of the land ' in franchisee finance with respect to opportunities in the Canadian franchise industry.



The amount of capital you need when you consider how to finance a franchise can often seem formidable. The amount you are able to finance will come from debt (your loan) and your own individual equity into the business... classically known as your ' down payment '. We quite frankly can’t remember when we have not heard the question from any client ' how much do I have to put in ‘. More about that one later.



We caution clients also to think of the financing over the intermediate and long term. By that we mean that yes, you have to have solid funding to acquire the franchise but at the same time start to think also of how any working capital needs might be solved after you have acquired the business .



But first things first, right? So back to our main point today, which is ‘In today’s tough business climate?

Is it still possible to attain the amount of franchisee financing you need?’ We hate to put on our lawyers hat and offer up the answer ' it depends ' but quite frankly we're fairly bullish on the ability for any Canadian business entrepreneur to acquire financing for a franchise.



The key elements of ' successful ' franchisee financing revolving around a small handful of key elements - they are as follows - a reasonable down payment aka ' equity investment ' by yourself as owner. Secondly, the financing must be well documented - this should be a bus. Plan or summary highlighting you yourself, your proposed acquisition, info on the franchisor, industry stats, and a financial plan that makes sense. Only one financial plan makes sense for your lender - the one that shows them how they will be repaid!



The business plan or a significant executive summary outlining what we have just discussed should not be a daunting task. While we recognize that many clients don’t have the experience, tools, (or simply the desire) to prepare such a document it in fact can be prepared efficiently and for a very low/reasonable cost... we would not recommend paying more than 1k or less for a plan that meets and exceeds expectations. Also, be prepared to provide some input into the plan, as no one should know the business and it’s potential more than you.



In Canada franchises in the 350-400k range are financing via 4 main methods. Thousands of businesses utilize the well known BIL/CSBF loan that quite frankly provides, in our opinion, the best rates, terms and structures for small to medium sized franchisees.



Additional financing comes from one or two specialty firms that tend to work only with established larger franchisors with requirements often approaching 1 Million or more per transaction. Also, is it possible just to get ' a loan ' from a Canadian bank to acquire the franchise? We would offer up that it is, if you have significant collateral to pledge, very strong net worth, and a pristine credit bureau record. We don’t see that type of transaction happening a lot, and certainly the idea of collapsing or collateralizing outside investments has all sorts of personal and financial implications.



Your ability to finance any hard assets via equpment financing can often nicely complement or round out a financing package. Again, it’s a case of making the numbers work and ensuring that you have taken some time to analyze the total financing picture. When we sit down with clients we tend to break down the financing into key areas such as ' soft costs ‘(for example your franchisee fee) equipment, leaseholds, and working capital. By identifying a source for all these you have the ability to cobble together a plan that works.



Bottom line, it’s very possible to get a solid franchisee financing package in place to complete your dream acquisition. Common sense attributes such as being prepared and doing your homework go a long way. Consider also talking tow or working with a trusted, credible and experienced Canadian business financing advisor who can help you navigate the franchise finance roadmap to entrepreneurial success.

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Article Tags: finance for a franchise, franchisee financing, how



Related Forum Posts
Protecting IP - Dear BigJim 22 Sure as long as it is in the Franchise agreement... ie wht you are offering as Francisor and what their obligations are as Franchisee It is all in the agreement........ take care Ian
Re: Finance is the primary requirement of business - [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn] Good point. I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
Finance is the primary requirement of business - Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.
re: restaurant start-up - I'm not sure about government grants for restaurants, but my recommendation would be to approach a lender that offers loans under the Canadian Small Business Financing Loan program where the government will guarantee 85% of the loan. You can borrow up to $250,000 to finance equipment and renovations under this program. Restaurants are very risky business, however some of the Chartered Banks will look at restaurants if there is enough of an initial equity investment and you have a solid business plan (experienced management team, good concept and strategic location).
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands


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