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Franchise Financing Canada – Canadian Solutions

Guest post by: Stan Prokop

Article Overview: Information on how franchise financing in Canada works with respect to financing ability and overall structure and processes for business people consider purchase and financing of a franchise .

Franchise Financing Canada – Canadian Solutions

Franchise Financing in Canada continues to be both a great opportunity as well as a challenge in obtaining the right financing, the right amount of funds, and most importantly the rates, terms and structures that will maximize your opportunity as a franchise entrepreneur. Clearly the concept of owning ones business in an already success and proven business model is appealing to many Canadian business people, men and women alike.

When clients come to us for franchising assistance they are focused on a number of key different areas relating to the financing and acquisition of their franchise. Many franchisees do not have a financial background - their experience is often based on their career and industry experience in the field they are looking to be a successful franchisee in. Therefore we encourage all franchisees to seek the advice of a credible, experienced and trusted financing advisor who can guide them through the franchise financing process.

So what are those prospective franchisees looking for? They are looking for the right amount of funds that will finance their venture to the extent that it can meet their profit expectations based on their own personal financial contribution, as well as of course the borrowed funds.

The century old phrase 'character / capacity/capital 'applies to all borrowing, and certainly franchise financing is no exception. The financier wants capable trustworthy borrowers who are prepared to make some sort of contribution of their own from a financial perspective. Credit quality of the borrower is one of the many factors in franchise financing. It is certainly not impossible to get financing if you have either a low net worth or a tarnished credit score, but it certainly becomes more challenging.

As a franchisee you want fast turnaround in the financing component of your new business. Our experience is that if the owner is properly prepared, with a decent business plan and all the necessary miscellaneous documents, that a franchise financing can generally be completed within 2-4 weeks. Miscellaneous documents that are part of the entire financing process include your personal financial information ( net worth , etc) , as well as items such as your executed franchise agreement, proof of deposit, your premises lease , etc . Some clients come to us for a 5-7 year term financing for their new business, but they only have a 3 year premises lease. Your premises lease must match the term of your loan, that's just common sense. If there is no premises there is no business, and therefore there is no loan payment. Again, just common sense.

Franchises in Canada are financed in several different ways, the major method being a specialize loan program called the CSBF program. Additional financing is done via term loans for working capital, equipment financing for hard assets. And generally a small operating line of credit at the opening of the business.

In the current more challenging financial and economic environment we believe the best franchise financing is achieved by combining several of the above financing options in a structure that makes sense for the business based on cash flow repayment ability and the collateral involved. Many soft costs such as franchise fees cannot really be financed , so they are often taken care of with the franchisees own investment portion of the total venture .

As a general rule it is somewhat easier to finance the purchase of an existing franchise, as the assets, cash flow, and overall value of the business are more established.

So let's recap some key bottom lines on franchise financing -

-Start your financing discussions and preparation early on in your business venture process

-Determine what mix of financing you need , which will be combined with your own investment

-Ensure you have a proper presentation and business plan - if you don't have one get one done by an expert

- If you don't have a financial background seek the advice of an experienced franchise financing advisor who can work with yourself and the franchisor to get the best total overall franchise financing solution for your proposed new business , relative to rate, term and structure and any collateral required.

That is a successful franchise strategy.

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Article Tags: franchise financing Canada



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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!
Re: Website Name Help - Its good that you have come up with the idea of setting up a website for your business. Now As it is into Business Solutions, I would recommend that you also include this into the name of the website. This will help you getting better results as far as SEO is concerned. You can start building a brand with this name. As you have already got the name booked, you can try changing it to something on the lines of Business Solutions as in azimabusiness or azimabusinesssolutions. Its a long name but still is good from the SEO point.


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