Financing A franchise? - Here's How Franchise Finance Works in Canada

Searchin' .. and Searchin.. for franchise finance in Canada ? The reality is that it's available, and we will share some common sense approaches to successfully financing a franchise in Canada. Although you may have spent a significant amount of time in picking what you feel is the right franchise finance opportunity the reality is that we are hoping that you have spent, or will devote an equal amount of time to the financing of the purchase. Securing funding in any specialized field is clearly a challenge so working with an expert in the field is always advisable. This is no time to be a rookie when it comes to the successful financing of your business. Many franchisees without any type of finance background might assume that traditional finance is available through institutions such as banks and credit unions. The answer to this assumption is actually no... And yes. Let's explain. We are not aware of any Canadian bank that will set up a specialized term loan for the full financing of your business. (This might happen if you have significant outside collateral, guarantors, pristine credit, etc - but generally no). But, the reality is that the banks in fact do indeed do most of the franchise finance in Canada - but it’s done under specialized program called the CSBF/BIL program. This should be your first point of call in financing your business. However, here's where the ' expert' advice is needed, as the program only covers the financing of certain aspects of the business, and you will need to cover off portions of your purchased that wont be financing through this program . This would be things such as ongoing working capital, the franchisee fee itself, etc. It's probably commons sense but aligning yourself with a franchisor that has a good brand and reputation and a successful share of their industry’s marketplace is in fact going to make financing a franchise in your case probably easier. What category are you in? we ask clients . What we mean by that is that you might be opening a brand new franchise, or alternatively purchasing a business that is already a franchise and the existing owner wants to sell. There are advantages and disadvantages to both strategies, and there is certainly no cut and dry answer around what established or new business might be best for you. A quick example - it might be sometimes ' easier' to finance an existing franchise that is being sold because the assets and cash flow and profits are more realistically able to be demonstrated. In certain cases some franchisees might want to expand their business via additional capital - that also requires a specialized focus. In summary the key elements of financing a franchise in Canada revolved around your ability to source and successfully complete financing that suits your purchase. This involves your own investment, known as the ' owner equity ' a well as the financing through programs such as the BIL program. Financing specific hard assets and complementing the overall finance package with a working capital term loan or operating facility will also get you tot he goal line. Pick your franchise carefully, and seek a trusted, credible and experienced Canadian business financing advisor who can help


Stan Prokop is the founder of 7 Park Avenue Financial . The firm specializes in business financing for Canadian companies     in the areas of working capital , asset based lending, SR & ED tax credit financing, equipment financing,  franchise financing and banking .


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