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Important Lessons On Financing A Franchise In Canada - Franchise Business Loan Success

Guest post by: Stan Prokop

Article Overview: Information on financing a franchise in Canada , The right franchising business loan is critical to your entrepreneurship success!

Important Lessons On Financing A Franchise In Canada - Franchise Business Loan Success

It might be a proven business model, but funding that model can be a challenge without the right information and assistance. We're talking about financing a franchise. A franchising business loan done properly is of course what is going to make those franchise opportunities you've chose work.



So is there a cost to buying into what most people recognize as a ' proven system ‘. The essential cost of course is your own personal investment into the business, as the type of financing that you obtain to acquire, and grow your business.



While many clients come to us with the mindset that financing a franchise is a ' start up ' type of business that comes with all sorts of risk and challenges the reality is that in many ways financial institutions and other lenders view this business model a safe way to enter into entrepreneurialism. And that translates, when you know what you are doing, into financing opportunities to create success for your vision.



A typical question we get is whether the type of business or brand or reputation of franchise opportunities in Canada matters relative to the finance challenge around acquiring that business. In general we can say it does not. Of course if you have been lucking enough to acquire the rights or an existing unit with an international brand that is already established that’s one step ahead, but the reality is that each new franchise financing opportunity is typically handled on its own merits.



In Canada you can typically be expected to put in a minimum of 10% permanent equity into your business when utilizing one of the most popular finance programs available to franchisees. However to make that transaction work, and get approved realistically you should be prepared to demonstrate the ability, not necessarily the cash, to fund up to 30 -40% of the acquisition.



Don’t forget also that an existing franchise, wherein you are purchasing for a franchisee who is selling is generally financed under the same mechanisms as a new unit. In Canada it always feels like the majority of franchises are Quick Service type restaurants but given that the franchise industry in Canada represents almost 50% of the economy you can be assure there are lots of other industry business models out there offered by Canadian, U.S. and international franchisors.



If there is one ' trick ' ( can we actually call it a trick?!) to financing a franchise in Canada it probably boils down to being prepared in advance for financing while at the same time working with a franchise financing institution or advisor who has special expertise in this type of finance.



In Canada many of the well known brands in franchising do in fact have relationships and packages available to you with 2 institutions, our chartered banks and one international franchise finance firm. However, we want to make it clear there is certainly no guarantee on financing your new business just because a relationship may have been forged in the past.



A franchising business loan in Canada is most easily accomplished via the federal BIL/CSBF program. This can be complimented by equipment and asset financing as well as working capital solutions that are either entwined or independent of the main financing.



Speak to a trusted, credible and experienced Canadian business financing advisor on franchise opportunities that can be properly financing in Canada.

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Article Tags: financing a franchise, franchising business loan



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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!
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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.


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