Tweet

How to Be A Success in Financing a Franchise in Canada

Guest post by: Stan Prokop

Article Overview: Information on how Canadian entrepreneurs can be successful financing a franchise in Canada. How does franchise financing work in Canada, and what are entrepreneur options.

How to Be A Success in Financing a Franchise in Canada

Financing a franchise in Canada should be an integral part the entrepreneurs business planning when acquiring a franchise in Canada. Our shared information here is applicable to franchisees who are buying a new unit directly from the franchisor, or alternatively an established business opportunity from an existing franchisee.

The excitement often pales a bit after the entrepreneur has chosen a franchise opportunity to focus on and then realizes that he now has to focus on financing that business. Typically clients ask us if financing a franchise in Canada is different from starting up any other business opportunity. The reality is that there is some pro's and cons to financing a franchise, and the basic premise of our advice is to ensure that the business owner is well informed about his financing options .

Depending on the type and size of the franchise that you purchase you will have to make some sort of personal investment in the business. Naturally clients are always asking us to quantify how much they must put up as owner equity. You can perhaps guess the answer, and it is of course, "It depends!"

That is simply because each franchisor must insist upon, based on their own experience in their multi unit business experience, that a certain specific amount of owner investment helps to guarantee success. The other side of the coin is simply this, which is that the type of financing that you choose will in many times dictate what amount you are required to put in as owner equity. The final piece of the puzzle simply that depending on the overall breakdown of assets and intangibles in your business that will play a large role in what can be financed and what cannot.

In Canada various different options exist for Canadian franchise financing. The most popular method by far is a loan program that is underwritten by the Canadian government; the formal acronyms for the program are BIL, or alternatively CSBFL. In our experience 90% of franchises in Canada, in some manner are underwritten within this program.

By spending some time and working with a recognized franchise financing expert who has credibility, experience and success in franchise financing will pay a multitude of benefits for the budding Canadian entrepreneur.

As challenging and difficult it might seem to both purchase and successfully finance a franchise in Canada it simply often is a questions of sitting down either on your own or with a trusted advisor and determining how cash flow works in the franchise business you are considering purchasing .

The most successful franchisees that we work with are in a position to make at least a ' reasonable ' investment in the new franchise and have carefully considered the cash flows inn's and out's of the business they are acquiring .

The optimal position you should be in is to be in a relatively solid personal financial position, have a decent personal net worth, and have some financial 'buffer 'in place to ensure the franchise investment can get off to a good start. In Canada, generally speaking you need to have a Credit Bureau beacon score of 650 to ensure financing approvals. Higher is better of course.

In summary, Canadian franchise financing is both a business opportunity as well as a challenge. The majority of franchises in Canada are financed under a special government program. Other forms of financing such as equipment loans and working capital loans often supplement the entire process. Work with a trusted, credible financing advisor to ensure you understand your options and have planned well from a financial perspective.

Related Articles
  How Much Will A Business Franchise Loan Cost When Financing A Franchise In Canada ?
  Canadian Franchise Financing – Made in Canada Solutions!
  Franchise Finance Canada – Financing your Canadian Business Purchase
  Financing a Franchise in Canada
  How To Finance A Franchise In Canada – Make Franchise Financing Work!
  How To Qualify For Franchise Financing In Canada – A Franchising Finance Business Loan That Makes Sense!
  Looking For Business Financing For A Franchise ? Here’s How Franchising Financing Companies Work
  Important Lessons On Financing A Franchise In Canada - Franchise Business Loan Success
  Franchise Business Financing - Canadian solutions
  Franchise Financing In Canada – Three Things You Need To Know
  How To Finance A Franchise – Your Options and Risk
  Franchise Financing and Franchise Loans for Canadian Entreprenuers
  Feel The Freedom ! Success With Canadian Franchise Financing Business Lenders
  Financing a franchise business? What you need to know to obtain finance for a franchise
  Franchise Funding and Financing Options for Franchisees In Canada
  How to Protect your franchise investment with smart financing options when you buy a franchise
  How Charlie Sheen and I Discovered How Financing a Franchise Works – A Canadian Franchise Lending Loan Business Story !
  How to Achieve Franchise Financing Success in Canada
  Financing A franchise? - Here's How Franchise Finance Works in Canada
  5 Franchise Business Financing Tips for Entrepreneurs in Canada

Article Tags: Canadian franchise finance, financing a franchise 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!
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.


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

Ask All to Buy!

Small Business Internet Marketing

Resistance to Change and How to Deal With It

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.