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Financing A Franchise Business Purchase Loan In An Economic Downturn ? Canadian Franchising Loans Explained !

Guest post by: Stan Prokop

Article Overview: Information on financing a franchise business purchase in Canada . What type of loan / loans and finance facilities make your franchise work!

Financing A Franchise Business Purchase Loan In An Economic Downturn ? Canadian Franchising Loans Explained !

The right approach. That's definitely what it takes to finance a franchise business purchase in somewhat challenging economic times.



The majority of aspiring franchisees in Canada look to banks and specialized finance firms when investigating the purchase of a new or existing franchise business. Let's investigate successful criteria and methods for completing the purchase of such a business.



Do Canadian banks finance a franchise? That naturally is the instinctive first ' go to ' when it comes to the entrepreneur’s choice of completing a business purchase in the franchise industry. Broadly speaking they don’t specifically finance franchises outside of specialize government or franchisor programs.



If you have a stellar personal net worth and credit rating we suppose that many banks would consider some sort of term loan based on collateralizing your personal assets... that naturally is not our recommended strategy, as we have always felt its important to separate your business and personal life when it comes to finances.



Jut how important is your personal credit history as well as your overall financial profile... what the finance folks call you personal net worth - simply speaking ' what you have ' and ' what you owe'! We assure clients that a strong emphasis is placed on your personal credit and business background - typically you would want a ' beacon score ' at the credit bureau to be in excess of 650.



If you do choose to secure a franchise with personal assets you'll be asked to provide collateral such as a home mortgage, etc. Again, as we said that’s not our recommended strategy.



So if the banks don’t finance franchises in Canada who does. Are you ready? Banks! What do we mean by that seeming contradiction? Simply that the majority of franchises in Canada are financed by the banks, but via vehicle known as the BIL/CSBF loan. It’s a program run by the federal government which many banks have adopted as a solid vehicle to finance franchises in Canada.



The basics of the program lend themselves pretty perfectly to financing a franchise business purchase, and the structure of these loans fits what you are trying to achieve. Why? Simply because terms of the loan are from 5-7 years, rates are commensurate with many other types of business financing, with the ' kicker' being that you only are required to guarantee 25% of the loan.



Will a franchisor step in to help you finance your business? That’s a question we get a lot, and the answer generally is ' NO ‘. In a number of cases though franchisors have worked out packages that can more easily facilitate the bank completing a financing. This tends to work with larger brands and larger business acquisitions in franchising. The bottom lone, don’t expect internal financing from your franchisor.



Other key aspects of successfully finance a franchise in a downturn are common sense business elements - a solid business plan, locating a banker of financial advisor that is experienced in franchise loans, and aligning yourself with a successful franchisor based on your own personal and business background .



Speak to a trusted credible and experienced Canadian business financing advisor on how you to can finance a business purchase in challenging times.

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Article Tags: financing a franchise business purchase, loan, loans



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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: Hello EvanCarmichaelers, and Thanks! - "Carmichaelers" ..nice.. Over at the Young Entrepreneurs I'm going to start calling my readers "DSilvelers" - I like the sound of that! Welcome on board theFranchiseMarket. Do you run a Franchise Business or are involved in Franchising in anyway?
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.
grants for restaurants - Well friend I don’t have any idea about government grants for restaurants, but I will recommend that you may try on some banks who offer loans for small business where the government will have some guarantee. Beside that Restaurants business is very risky so some of banks who gave some Financing Loans they will look at on it if there is enough solid business plans.


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