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Need Some Help ? How to Buy And Finance A Franchise - Canadian Franchising Funding & Lending For The Loan You Need

Guest post by: Stan Prokop

Article Overview: Information on how to buy and finance a franchise in Canada . What type of franchising loan is available for entrepreneurs and how does this lending and funding work ?

Need Some Help ? How to Buy And Finance A Franchise - Canadian Franchising Funding & Lending For The Loan You Need

It's not an uncommon question from clients: ' Where Can I get help on how to buy a franchise ‘... and equally as important what type of financing lending and funding is available under a franchise loan scenario.



By that time the entrepreneur has already gone through those pros and cons of buying a business under the franchise model. The benefits can be significant, and of course no business model is risk free so there are cons and consequences do making the wrong decisions.



In general it’s safe to say you need less capital when you ' buy ' a franchise. Other businesses not under the franchise model might come with significantly higher costs, especially if they are established, profitable, and have assets and cash flow. These businesses are often sold on what the finance folks call ' multiples ‘. Those are basically increased weighting applies to things like cash flow and profit or goodwill.



As a quick example if a business is earning for example 100k per year and the owner is selling it a typical valuation for that industry might be a 5x multiple of income . So your purchase price now becomes a half million dollars. That’s ashen a franchise purchase and the ability to get funding for it becomes a lot more attractive.



Naturally if your franchisor is doing well you're looking at buying, hopefully at a reasonable price, a proven business model, and a well known brand that is growing in popularity.



Ironically, and we certainly don’t think it has to be the case, but financing and funding for a franchise loan often becomes a huge challenge for clients we talk to . Why? For some simple reasons, a lot of them simply human nature. Buyers of a franchise don’t understand the qualifications, and they come with pre conceived notions that the banks and other commercial finance companies wont want to and don’t finance this type of business.



The reality is that franchise lending is in fact alive and well in Canada, with most lenders recognizing the huge part that franchising plays in the Canadian economy.



So how do you identify a ' favorable' financial lending solution for financing your new business? Certainly we tell clients that they shouldn’t expect a lot of help from their franchisor, whose job it is to sell franchises, not finance them with their own capital.



The majority of franchises under 350K in Canada are financed by the BIL/CSBF program, which is a government loan that is guaranteed in large part to the lenders who participate; in most cases this is Canadian chartered banks . The terms are very favorable - we repeat very favorable. They include long amortizations, great rates (we think) and minimal personal guarantees.



The challenge for the prospective franchisee is simple locating a bank or franchise financing expert who has the knowledge to package a transaction that meets the criteria of the program. Many clients tell us they were declined initially simply because their package was poorly or incorrectly prepared, and we can assure you, it not rocket science.



Not all banks and BIL/CSBF lenders are the same. So seek and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with how to buy a franchise, and finance it with a loan that makes perfect funding sense.

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Article Tags: funding, how to buy a franchise, lending, loan



Related Forum Posts
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: Hello EvanCarmichaelers, and Thanks! - "Carmichaelers" ..nice.. Over at the Young Entrepreneurs I'm going to start calling my readers "DSilvelers" - I like the sound of that! Welcome on board theFranchiseMarket. Do you run a Franchise Business or are involved in Franchising in anyway?
Re: Finance is the primary requirement of business - [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn] Good point. I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
seeking investors for global finance opportunity - Phoenix Global Funding, Inc. is a Global Commercial Loan Brokerage, Merchant Bank, and a Business Consulting Firm that can work on commercial deals of all sizes. Our greatest strengths are revealed through our superior internet interface and our extensive private network of lenders and equity partners with which we can service any company on the planet by having the ability to broker and coordinate mergers, acquisitions, and funding of all kinds. As a full service commercial financial conduit we also provide valuation, business management, and profitability consulting. I am offering common stock ownership in Phoenix Global Funding, Inc. It is exciting to be in a position to be able to share not only ownership but profit in this latest project. Our business plan was developed from the oldest, most reliable and the most profitable business model ever created, LENDING. This is all about what the big boys do on Wall Street everyday. We are raising US$1,000,000.00 with share prices starting at $1.00. The exit strategy is in 3 years with a minimum 3 to 1 return on capital, plus a 20% profit share annually.
Re: Info for would be franchisers... - [quote="theFranchiseMarket":3lb4fj39]We subscribe to Franchise Times as well . . . its really a pretty good read and the information seems fresh and direct, without hardly ever being forced, and the advertising unobtrusive in comparison to the content . . . something that is becoming harder to find these days in this industry . . .[/quote:3lb4fj39] Do you read Franchising World, the IFA publication? If so, what do you think of it?


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