Tweet

Franchise Business Financing Canada – (Preparing your strategy)

Guest post by: Stan Prokop

Article Overview: The articles provides some overview of franchise financing in Canada, and covers early steps in the financing decision thought process .

Franchise Business Financing Canada – (Preparing your strategy)

When Canadian business owners and entrepreneurs ask us what their financing options are for a Canadian franchise we indicate to them that the options certainly aren't unlimited, but a number of standard and also creative options do exist.

Naturally all of these options are supplemented by your own savings or investment, what the finance world typically calls 'owners equity '. In the current somewhat difficult challenging environment we have observed that there is upward pressure on the amount of owner equity you need to put into the business yourself.

Most franchises in Canada are typically financed via loans, or debt - Canadian franchising does not really lend itself to a venture capital type environment. So where do those loans or debt come from - typically it is from traditional sources such as banks, and our firm has found success in effect cobbling together a couple of different financing sources to ' get the job done '.

When entrepreneurs come to us for franchise financing them is either looking for one of three scenarios - they are:

1.Looking to renovate their franchise location

2.They are wishing to purchase a brand new franchise

3.They have entered into a purchase agreement to purchase an existing franchise

Each of the above scenarios is worth mentioning with respect to a couple key points and observations:

1.Renovating an existing franchise via leasehold improvements or new equipment is probably the easiest financing scenario - as we have a real business already on our hands that is hopefully doing well, making some money, and looking to grow / expand

2.New franchises are probably where most of the financing challenge is as the entrepreneur and his trusted business financing advisor have to sell the lender(s) on the nature of the franchise, the probability of success, the industry business model, etc

3.Existing franchises are fairly easy to finance as again we have a business with sales, assets, and profits already in place. Some owners we work with target franchises that are existing that might not be doing well, they negotiate a fairly reasonable price, and have the determination that they can 'turn the franchise around. Sometimes that is not necessarily as easy as it sounds.

We can't over emphasize the fact that the 'financing' aspect of the business purchase should be entered into very early on in your whole process. Typically you have selected a franchise, or are entertaining a couple different options. In the last couple years we have been made aware of specialized firms that match your own business traits and style with the type of franchise that would most suit you. Not everyone is cut out to sell donuts and pizza, and we find some owners simply look at the appeal of potential revenues and profits, and not into the issue of 'does this franchise suit my overall business style, work ethic and skills.

'Skills '- Let's focus on that for a moment. In our experience owners stand a significantly more better chance of success when they have some industry experience - We are not saying you 'can't be successful with no industry experience, but certainly those chances improve, and we hasten to add that issue is one criteria of any lender - i.e. does this business owner have the skills to run this business on a daily basis and grow and profit.

In summary, finalize your franchise purchase and start early on in your process to determine a financing strategy that works and will compliment your skills and investment. Rely on the services of a trusted business franchise advisor who will work with you through the entire financing process.

Related Articles
  How Much Will A Business Franchise Loan Cost When Financing A Franchise In Canada ?
  Franchise Business Financing - Canadian solutions
  How To Finance A Franchise In Canada – Make Franchise Financing Work!
  Canadian Franchise Financing – Made in Canada Solutions!
  Deciding On How To Finance A Franchise? Canadian Franchising Business Loan Info On Financing and Lending That Makes Sense!

Article Tags: business financing, franchise business financing Canada, franchise financing Canada



Related Forum Posts
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!
Need Help Growing? - One resource that I've found to be extremely helpful was calling the Business Development Bank of Canada (BDC). I've met a lot of top business owners who have used the BDC for various reasons (i.e. sales/marketing strategy, training, foreign development, etc) and all say it was a massive help. The BDC will usually help you create the strategy using industry specific consultants and then not only help you fund the consultant's work but also the strategy. Their loan terms are little higher than banks but they’re a lot more easy going and understanding than regular banks.
BDC - [quote="IWDCanada":jib6tqt9]I think if you try to do business in the Maritimes the Business Development Bank of Canada might be able to provide grants.[/quote:jib6tqt9] On that note, does anybody have any experiences with the Business Development Bank of Canada that they would like to share? I have been considering approaching them for a business loan.
Clothing Niche - Yasunori, can you dig deeper into the clothing niche? e.g. Business Casual for people 6ft and taller (men only, women only or both). Victoria Secret is big in Canada because they don't have retail Stores here and the only way to get their product in Canada is thru online purchases. They have a great Hassle-free return policy too.
Re: BDC - [quote="Jones":255lkmrn][quote="IWDCanada":255lkmrn]I think if you try to do business in the Maritimes the Business Development Bank of Canada might be able to provide grants.[/quote:255lkmrn] On that note, does anybody have any experiences with the Business Development Bank of Canada that they would like to share? I have been considering approaching them for a business loan.[/quote:255lkmrn] I'll be working with the BDC later this month on a few projects. From what i've been told they are really great when it comes to small business. Their loans have a little higher interest but their payment terms are a lot easier to swallow. I can give you a contact if you need.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Selling with Humor (and a Sorry Butt)

Four Reasons Why Entrepreneurs Should Blog

Induction – your first management job

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.