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Revealing How The Funding Of Your Franchise Purchase Works In Canada – Franchise Financing Lenders & Your Loan

Guest post by: Stan Prokop

Article Overview: Information on franchise financing lenders in Canada . How the funding of a franchise loan works when you purchase your dream franchise.

Revealing How The Funding Of Your Franchise Purchase Works In Canada – Franchise Financing Lenders & Your Loan

We're never ones to be negative, so all we can say is that you can look at it as a problem, or an opportunity. We're talking about how franchise financing lenders work in Canada. Unless we're missing something, you've just made the decision to purchase a franchise in Canada - so how exactly does the approval and funding of that loan work? We're going to clarify that for you, right about now..!

The positive aspect of our information is simply the fact that franchising is ' hot ' again. Of course it's always been around, and the actual stats on how much of the industry plays an important part in the overall economy is surprising to most. But when world fell to its knees, financially speaking, in the 2008-2009 global recession (and boy did that include Canada) many industries felt the pain, as did franchises. Well, the good news is that's over.

Clients always seem a bit overwhelmed with all the different aspects of putting together their total plan for their new franchise business. That includes choosing the business that matches your skills and investment, picking a location, finding employees, etc. But the biggest challenge seems to be the financing of that purchase via a franchise loan.

So is traditional bank financing available for a pure franchise loan. We're not 100% sure we can give you a ' yes ' on that one, but don't despair as you will soon see. We suppose if you have pristine credit, a high net worth, strong outside collateral and guarantors, etc you could facilitate a term loan to purchase your business. That unfortunately is not he profile of many of the clients we meet that are looking for loan funding.

So what are those options then? In reality the specialty finance firms that focus on providing only franchise finance are a very small number in Canada. There are more of them in the U.S., but that's not our turf! The specialty firms that provide the financing for the industry in Canada focus on the large well know brands that have lots of franchise units, strong franchisor financials, etc. That is only of course a small percentage of the total industry.

So whats the solution then if you're in the other majority, the hundreds or thousands of entrepreneurs who still require some major financing assistance. The answer is the Canadian BIL/CSBF program. It's a customized federal program for businesses in Canada, with a loan funding cap of $350,000.00.

This program allows a Canadian bank to be your new franchise funding partner - mostly because the loan is guaranteed by the government so there is only nominal risk to the bank. Would the bank lend you those funds outside the program? As we said, maybe... but we're sketpical.

So if you are a new entrepreneur with a reasonable record of business success and experience how exactly do you proceed to qualify for your franchise loan purchase financing?

We going to break that down into a few key areas - they are focusing on the size of your investment, determining your own equity or deposit into the transaction, and then focusing on key fundamentals required for a loan approval.

Key elements to focus on are ensuring you can prove you have a reasonable credit history. Prepare a business plan, or have a plan prepared for you , that focuses on you, the franchisor, the financial potential of your business , one that demonstrates you're ready to run a business, and , oh yes, repay that loan .

Typical investments by yourself in the new business range from 25-40%... and as far as that credit rating goes you should have a credit bureau score of 650+.

Is there one secret to getting a final approval? We think it's a bit more complicated than that, but not as troubling as you might think. Focus on a business plan, presenting yourself properly during the proposal process. We point out to clients that every new business, small and large actually goes through these same processes.

We recently came across a statement that maintains the four ' P''s of franchise success are people, purpose, payment and protection. In summary, a good business candidate, a good franchise pick, ability to show you will be successful, and a back up plan if things don't work out - example: spouses outside income.

So can we summarize? Franchising is popular again today... the best franchise financing lenders are specialized firms as well as the ever popular BIL/CSBF loan. Be prepared, and if you need assistance, consider seeking a trusted, credible and experienced Canadian business financing advisor who can fast track you to loan funding success for your new business.

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Article Tags: franchise financing lenders, funding, loan, purchase



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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.
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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