Tweet

Franchise Finance – Info You Must Know re: Franchise Financing and a Franchise Loan In Canada

Guest post by: Stan Prokop

Article Overview: Franchise Loan Canada ;Information on what Canadian entrepreneurs must know re: franchise finance – how franchise financing works in Canada and what you need for a franchise loan .

Franchise Finance – Info You Must Know re: Franchise Financing and a Franchise Loan In Canada

As a Canadian entrepreneur considers a franchise purchase you want franchise financing info re the Canadian environment. When we meet with clients the questions is always very clear -

What do I need to know about franchise financing and how can I get a fast track to franchise loan approval.

Let's cover off the basics in order that you are well prepared for the full completion of a successful franchise acquisition. That of course includes selecting the right franchise for you ( we leave that up to you !) but lets ensure you are well equipped to cover off franchise financing success on your own or with the assistance of a trusted, credible and experience franchise financing advisor .

Many fundamentals in franchise finance are key, and you should ensure these are in order prior to contemplating a franchise loan for the purchase of a new or existing franchise. (Many of our clients contemplate existing franchises that are being sold for some reason or another - they feel they can better validate chances of success by assessing the business results, location, etc.)

Speaking generally, you should ensure that you have a reasonable credit history and personal credit score. Whether you like it or not the two main credit bureaus in Canada allocate a score to every consumer and borrower in Canada - we can generally say that your personal bureau score should be in the 650+ range to acquire the best, and proper franchise loan approval.

Many clients we talk to believe the 'franchising fee 'being charged by the franchisor can be financed. You need to understand that is what people in the finance business call a ' soft cost ' and you should generally be prepared to use your own working capital for that issue as apart of your total financing plan . Naturally that amount still counts as a part of your overall equity contribution.

We should focus in on that point for a bit - You do not borrow in Canada 'successfully 'using the OPM model. OPM stands of course for other people's money. Business borrowing, whether you are General Motors or an independent franchisee, has to be based on a combination of debt and owner equity. While in some cases you can achieve successful financing in Canada with a 10% deposit, in general the current economic climate calls for a 25- 40% or so owner equity contribution.

Where do clients get this 'personal equity contribution' that is a critical part of your franchise plan. In general it comes from savings, the liquidation of investments, or in many cases a collateral mortgage. The one positive feature of a collateral mortgage equity contribution is simply that rates, terms and structures are low and variable. I.E. low rates due to the current rate environment in Canada, and flexible repayment structures, i.e. no pre payment penalties, etc.

The positive advantage of arranging franchise financing for a resale franchise is that you can validate the profit and cash flow potential of the business. We should add that we are always a little bit concerned when a client assures us he or she can over turn the financial position of a failing franchise. Clearly a case of buyer beware we would say.

However, as we have stated, purchasing an existing franchise gives you great insights into the ownership and running of the business - including insights from the owner, i.e. the current franchisee. One can forgive the franchisors for being bullish and optimistic on their business, as their business is of course selling franchises.

We recommend all clients incorporate a business when applying for a franchise loan, if only for the reason that it is prudent to separate your business life from your personal life re liabilities, assets, etc.

So whats our bottom line - it's simply that franchise finance in Canada is as complicated as you want it to be. Work and seek out a trusted, credible and experienced franchise financing advisor who will assist you in putting together the right franchise loan structure that meets lender and personal needs. That's a solid financing plan!

Related Articles
  How Much Will A Business Franchise Loan Cost When Financing A Franchise In Canada ?
  How To Qualify For Franchise Financing In Canada – A Franchising Finance Business Loan That Makes Sense!
  Worried About Getting A Loan For A Franchise ? - Here's your 2011 Franchise Financing Guideline!
  Financing a franchise business? What you need to know to obtain finance for a franchise
  Common Mistakes to Avoid When Entering Into a Franchise Financing
  How To Finance A Franchise In Canada – Make Franchise Financing Work!
  Financing a Franchise in Canada
  New Franchisee? How Franchising Lenders work in Canadian franchise finance
  Franchising with all its Success
  How to Finance Your Franchise Business Opportunity
  Financing Your Franchise in Canada - A Winning Formula For Funding Via Franchising Finance Loans
  Looking for Ways To Finance a Franchise ? There Is Only 1 Way When Financing a Franchise Investment!
  Financing A franchise? - Here's How Franchise Finance Works in Canada
  Don’t Make These Mistakes In Financing Franchise Opportunities In Canada . A Franchising Loan Must Make Sense – Here’s Why.
  The Secret Of Matching The Right Financing To Your Loan For A Franchise – Business Loans For Franchises .. Done Right
  Financing a Franchise in Canada
  Notes From The Trenches – Canadian Financing For Franchises – Get Your Business Franchise Loan Right !
  Pitfalls And Solutions When You Finance A Franchise With Franchise Financing Companies In Canada
  How to Succeed When buying a franchise store and financing its cost
  Important Lessons On Financing A Franchise In Canada - Franchise Business Loan Success

Article Tags: franchise finance, franchise financing, franchise loan



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.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]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.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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.

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

Making the Most of Your Trade Show Experience

How To Master The Ins and Outs of Google+

Selling with Humor (and a Sorry Butt)

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.