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Starting a Franchise ? Looking For Business Money To Finance A Franchise?

Guest post by: Stan Prokop

Article Overview: Information for Canadian entrepreneurs who seek business money when starting a franchise. How do you successfully finance a franchise and what tips and information do you require for additional assistance . Methods You Can Use To Successfully Finance Your Franchise

Starting a Franchise ? Looking For Business Money To Finance A Franchise?

The priority of securing business money when you have selected and are starting a franchise becomes even more important as you focus on getting the business started and up and running . Let's discuss some of the sources of capital in the Canadian franchise environment, and we'll share some tips and strategies that have helped many other clients looking for Canadian business financing in the franchise environment. There are actually 5 sources of capital that will successfully allow you to complete the financing of your new business. They include your own equity injection into the business, i.e. your down payment, bank and institutional financing (its s not what you might think, so stay tuned on that one ) , asset financing via an independent finance company, and finally a potential vendor take back from either the franchisor of the existing franchisee from whom you are buying the business . Let's therefore backtrack a bit and hopefully give you some solid tips and new information around how this financing is, in our words ' cobbled together ' to give you a total financing solution for your new business. It's always the same question when we talk to clients... ‘How much do we have to put in ‘... they are of course referring to their owner equity investment into the business. The truth is that the amount varies when it comes to the financing portion of your business. That amount is flexible and can vary anywhere from 10 - 50 per cent depending on the size of the financing and the amount of working capital you want to have on hand d on day once that will allow you to finance the business properly . Another tip we'll share in the above mentioned ' owner equity ' area is simply that in many cases some franchisors will actually mandate how much you ' have ' to put in. We therefore recommend to all clients that they get a clear understanding up front so there are no surprises. In defense of the franchisor they are probably relying on their own experience that allows them to have determined over time what it takes to successfully run and grow one of their units in their franchise system. So how exactly do the banks in Canada participate in the starting of your franchise? Is it as simple as approaching your bank and determining what business money they will lend to finance a franchise? Not really we tall clients. We have rarely if ever seen a direct term loan to cover the financing of a franchise. But yet the banks do participate in most of the franchise financing in Canada. How? They piggy back on a special government program called the BIL/CSBF programme. This loan is underwritten by Ottawa, and has very generous terms and conditions around rate and structure. Unbelievably you are actually only guaranteeing personally 25% of the loan, which is another benefit. So our cobbling together of a financing package is getting there - another great strategy is to finance separate individual assets with an independent lease firm. This type of asset financing is easier to get approved, and can cover a significant portion of any assets that need to be financed. We spoke of a potential vendor take back from the franchisor or existing franchise as part of the purchase package. We will share with you several tips and comments on this one - namely that you should not fully rely on getting this type of financing in place. Occasionally you might be successful, may times you wont. Why? Simply because the franchisor or existing franchisee is motivated to sell you a franchise, not finance it! Speak to a trusted, credible, and experienced Canadian business financing advisor in the area of starting a franchise and getting the right business money in place to allow you to complete your new role as a Canadian entrepreneur.

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Article Tags: business money, finance a franchise



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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.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]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.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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