Stuck At The ‘What To Do Phase’ Of A Franchise Loan In Canada? Financing A Franchise Purchase In Canada

OVERVIEW – Information on financing a franchise purchase in Canada. What are the most effective means of obtaining a franchise loan in the Canadian marketplace

Financing a franchise purchase in Canada often involves a ‘ trust factor ‘ that is being sought by the franchisee when it comes to choices and alternatives in accessing the right capital for the business purchase. That purchase can be from the franchisor directly, or from an existing franchisee that has the authorization to sell his or her business. Let’s dig in.

Often the franchisee is simply stuck at what we call the ‘ what to do ‘ phase of the business purchase decision. While many regard Canadian chartered banks as the solution for the buying of the franchise the hard truth is that this type of business financing is rarely done directly by the bank.

When it is it requires the purchase of one of the larger and well known names in the franchise industry. This eliminates hundreds of other franchises where the franchisor has not established a relationship directly with a bank program.

What then are three solutions available for the entrepreneur who wishes to enter this industry? One is what we just mentioned, purchasing one of the larger ‘ names ‘ in the business where established programs are in place. (By the way, that doesn’t guarantee approval, it gives you only the right to apply!).

The second solution is to work with a specialty franchise finance lender which again has some constraints around what and who they are willing to finance. The third solution? It’s to cobble together some financing via commercial finance firms that might consider financing specific assets such as equipment, leaseholds (difficult to finance), as well as working capital needs.

But wait… there’s more! One tried and tested solution is to utilize the Govt Small Business Loan, aka the ‘ SBL ‘. While not originally intended to finance the purchase of a franchise it has become the ‘ go to ‘ method of franchising finance for thousands of entrepreneurs.

What makes the govt loan so attractive is that it is easier to get approval for by virtue of the fact that the govt guarantees the majority of the loan to the bank. Rates are also attractive, and that includes the ability to prepay without penalty. Additionally not personal collateral is attached to the transaction, and those leaseholds, often difficult to finance, are fully financeable under the program.

Franchise purchases
up to 350,000$ are financeable under the SBL. Basic requirements are a good personal credit history, a positive personal net worth, as well as being able to demonstrate and provide a strong loan package that includes a business plan, cash flow projection, etc. Remember the bank (and the govt) is not an equity partner with you, they simply want to be repaid from projected cash flow/profits.)

If you’re looking for franchise capital and are reluctant to pledge personal assets, home, etc seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with your financing needs. It’s virtually the end of your ‘ what to do ‘ phase in financing a franchise purchase in Canada.


Author: Stan Prokop – 7 Park Avenue Financial :
Business financing for Canadian Firms , specializing in working capital, cash flow, asset based financing , Equipment Leasing , franchise finance and Cdn. Tax Credit Finance . Founded 2004 – Completed in excess of 90 Million $ of financing for Canadian corporations . Info /Contact : Financing A Franchise Purchase In Canada

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