Tweet

Franchise Finance Lenders – The 4 Most Critical Things You Need to Know about Franchise lending

Guest post by: Stan Prokop

Article Overview: How to Achieve Franchise Financing Success, Information on how Canadian entrepreneurs should approach franchise finance lenders, and what you need to know to be successful in franchise financing for your new business .

Franchise Finance Lenders – The 4 Most Critical Things You Need to Know about Franchise lending

Clients are always asking us, who are the franchise finance lenders in Canada. At that point they have made the decision to invest their time and money in a new entrepreneurial business, and have chose to either purchase a new franchise, or, in some cases and existing unit. (There are a number of reasons why current franchisees want to sell their unit to you - but you should carefully explore the reason for the sale for the obvious reasons)

So what are the 4 most important things you need to address, assess, think about, and action in your decision to finance a franchise. We feel they are as follows: They are by no means in order of importance, but at the same time you probably won't be successful until you are in a position to have satisfactorily addressed all the issues:

1.You should have some experience in the industry, of feel confident that you and the franchisor have the ability to get you up to speed in training if it is a new industry for yourself - ( We caution you that the number of franchise lenders in Canada place a certain amount of focus on management experience ). However, if you can demonstrate good business acumen and previous success that certainly will help the franchise financing process.

2. You must demonstrate that you have a solid business plan - yes this had to be; written out' so to speak. If you do not have the interest or ability in generating such a document you should seek the services of a trusted, credible and experienced business financing advisor to prepare such a plan. In our opinion the reasonable costs associated with such a plan are in the 750-1000$ range , which is a small portion of your overall investment and if it produces the financing you need, as well as delivering on a reasonable financial action plan that surely is money well spent .

3. Location / Location/ Location! That phrase is of course used a lot in real estate business - if your franchise is one in which a location is important you should clearly seek out a location that will assist you in driving revenue and sales growth for your industry. We caution many clients that their own belief in the value of the franchise and their own skills in taking the business forward cannot always overcome a bad location. So if that's a key element in the franchise you are considering purchasing then one of the ways in which you can address that issue is usually free - it's simply speaking to a local real estate agent, preferably one with business, not consumer experience, and getting advice and opinions on the location you are contemplating.

4. Capital - Money! The financing of your franchise in Canada comes from the two key elements of business. These two key elements are the same for your franchise as they are for a mega corporation such as IBM - The two elements are:

Debt

Equity

The equity portion of your investment is your own personal resources. You should never entertain the thought of obtaining 100% financing for a franchise - while that generally wont fly with any franchise lender, at the same time you would probably be over leveraged and a suitable candidate for business failure .

So how are franchises financing in Canada. Who are the franchise finance lenders?

The best and most popular program is a government loan that is underwritten by the federal government, the technical name for the program is the BIL program, and most Canadian business people know the program as the Small Business Loan. It goes up to $ 500,000 in some cases and is by far the most popular method of obtaining franchise financing, in tandem with you own investment, which can be anywhere from 10-50% per cent of the total amount you require . In recent years the bar has been raised on your personal equity contribution into the business.

In summary, franchise lending in Canada is a somewhat of a unique boutique type of finance. Work on our four fundamentals we have presented - also seek out the services of someone who is a trusted, credible and experience franchise lender who can assist you in your transition to franchise purchase and franchise financing success.

Related Articles
  Finding the Money for a Franchise
  End Your Canadian Franchise Lending Worries – Financing & Funding Lenders & Solutions For You !
  Tips on writing a Franchise Business Plan
  Need Some Help ? How to Buy And Finance A Franchise - Canadian Franchising Funding & Lending For The Loan You Need
  Challenges in Canadian Franchise Financing in 2010
  Canadian Lenders In Franchise Finance – Lending & Funding Options For Franchisee Financing
  New Franchisee? How Franchising Lenders work in Canadian franchise finance
  How To Qualify For Franchise Financing In Canada – A Franchising Finance Business Loan That Makes Sense!
  How to Finance Your Franchise Business Opportunity
  Raising Finance to buy a Franchise
  Franchising with all its Success
  Financing a Subway Franchise in the United Kingdom
  Are You Ready to Start a Franchise?
  Finding the best Franchise business for yourself
  Financing a franchise business? What you need to know to obtain finance for a franchise
  Finance options when looking at Franchise Business
  Surviving The Franchise Business Loan Process - Doing it Right In Franchise Finance Funding in Canada
  Looking for Ways To Finance a Franchise ? There Is Only 1 Way When Financing a Franchise Investment!
  Don’t Gamble On Franchise Funding Success . Finance Your Franchising Opportunity Properly!
  How To Finance A Franchise In Canada – Make Franchise Financing Work!

Article Tags: franchise finance, franchise finance lenders, franchise lending



Related Forum Posts
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: 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.
Re: Franchising Brokers vs Franchising Consultants - Franchise consultants are free and work with you without any obligation. they do not work for any one franchise but do get a percentage of the franchise fee when a franchisee that was registered with the franchise came from the consultant and the franchisee signs. They will try to match up your interests and skills to franchise businesses that are right for you. They can explain franchise guidelines and help you in any way they can. Franchise brokers usually get paid by the client and/ or franchise (generally get some type of commission). Additionally, they can get points or referral fee off the deal if they refer you to a lending resource too after they sell you on a franchise. Typcally they will try to sell a prospective franchisee on a larger deal so they get a larger commission.
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.


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

Environment and productivity at the office

Adjusting Your World

Join Conversations Politely, Part 1

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.