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Don’t Make Mistakes When Searching For Franchise Finance Lenders When You Buy A Franchise In Canada

Guest post by: Stan Prokop

Article Overview: Information on how to plan properly to buy a franchise and what key issues franchise finance lenders are looking for when you are choosing to purchase an existing or new franchise . How To Source Franchise Finance In Canada

Don’t Make Mistakes When Searching For Franchise Finance Lenders When You Buy A Franchise In Canada

Business folks often refer to the term ' key to success ‘as part of their business plans. Certainly the key to success when you buy a franchise is to finance it on time, and properly; we tell clients you don’t get a lot of chances to make mistakes when you are working with franchise finance lenders!

The concept of financing your franchise is a broad one... it might be one single loan or a couple different finance strategies to get you to the goal line, which is of course acquirng and owning your own business under a franchise umbrella... in effect the Canadian dream .

Try and try again generally doesn’t work in franchise finance - you more or less, in our opinion, get one chance to do it right . That therefore involves getting all your ' ducks' lined up properly and working with an experienced Canadian business financing franchise advisor, or if you prefer, yourself and the lender directly.

As we said, making mistakes in business finance is not where you want to be - so plan, do it right, and do it once. Let's examine some of those underpinning you need to be successful and avoid those errors.

In general some of those cornerstones are decent personal credit history (more about that in a minute - as we can hear our clients already " what's decent?!), a down payment that makes sense. and a financial plan that demonstrates your ambition to be successful .

This latter point is usually covered off in a business plan. We can’t ever imagine buying a business without a plan, and humbly submit that if you don’t have a plan you are primed to fail - and that’s not a good thing when you have your own funds at stake.

Can you buy a franchise in Canada, and finance it without a good personal credit history. We tell clients the sad truth is that it is difficult, if not impossible, to do that successfully. That’s because franchise finance lenders view your business as both a start up and a small business, and they relate those two terms directly to how you manage your own personal finances as the owner. To put is very simply, the lender is saying ' if this man or woman isn’t paying Visa then why should I think they are going to pay us....’ In Canada the credit bureau system is based on a score to 800 and you need a certain specific number to qualify for franchise financing. Speak to a trusted, credible and experienced business financing advisor as to how you can manage and work through that process.

You probably have spent a large part of your life dreaming about crafting a great business plan, opening balance sheets, 3 years of projected cash flows... loan amortizations, etc. Uh... we're being a bit sarcastic of course!! But the reality is you need a solid business plan to demonstrate how you will be successful. It’s a great document for benchmarking down the road even how you are doing against your plan.

In Canada the majority of franchises are financed and subsidized so to speak by a special federal program called the BIL program. Don’t make a mistake in not understanding what the qualifications are, and work with an expert if you don’t feel you are comfortable in navigating the finance maze.

So, is financing the key to Success when you buy a franchise in Canada. We'll let you be the judge... but if you are on the side of our opinions plan, and work with an expert , do it right, and avoid mistakes that will jeopardize closing the transaction ,.

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Article Tags: buy a franchise, franchise finance lenders



Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
canada resources - I used to have a connection to a franchise consultant in Canada at "Franchise Officer" in Toronto. I wish I could remember his name ( but I can check my files at the office tomorrow). Anyway, he had a lot of connections to banks in Canada. He may know of them and may be able to offer some feedback. If you are looking for a business loan, Canada has similar business loan programs to that of the USA's Small Business Administration (SBA). I think its SLBS in Cananda, and I probably have the list of it's lenders in my office also. Do you think either can be helpful? If so, I can get back to you with this information tomorrow. Let me know!


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