OVERVIEW – Information on financing for franchising in Canada . What are the key ingredients of a franchise finance loan when entrepreneurs seek opportunities as a franchisee
Financing for franchising in Canada is often viewed as a ‘ who you gonna call ‘ situation for many prospective franchisees’ in Canada. We’re ourselves still not sure whether a total solution financing package for a franchise purchase is an art of a science – in fact it’s probably a bit of both.
And frankly more often than not they are ‘ flying solo’ when it comes to their search for a franchise finance loan. There are some reasons for that, so let’s dig in.
We recently read a great article by a Toronto franchise lawyer who reaffirmed (thankfully!) what we have been saying for a long time. Some of those key points included:
A decent chunk of the equity in a new franchise needs to come from the borrower
Franchise finance scenarios differ from many forms of traditional financing because there are numerous aspects: franchise fees, leaseholds, working capital, assets, technology, and in some cases real estate
The type of financing you are going to receive also has a lot to do with your overall personal net worth and personal credit score at the credit bureau
While Canadian chartered banks are viewed as the most logical ‘ go to ‘ source for financing in fact this is somewhat misunderstood given that the majority of loans approved for franchises are under the auspices of the Canada small business financing program – which is a government guaranteed loan .
So, while the upshot of the article was clearly, and we quote ‘ they will likely be on their own when it comes to financing ‘the franchisee shouldn’t despair. Why? Simply because if you have the help and assistance you need from a 3rd party non biased source there are a number of ways to solidify financing for franchising.
Those methods include:
Specialized franchise loan financiers
The Govt SBL program
Supplemental financing via cash flow term loans, equipment financing, and merchant cash advances
The one spot most franchisees think they will get the most help will in fact be where they get the lease help. Thats because franchisors are interested in selling you a franchise, helping you run it via their business models, but are not interested, ( or able) to assist you . Here it might make maximum sense to seek out the expertise of a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can assist you with making your business opportunity a total success.
Author: Stan Prokop – founder of 7 Park Avenue Financial
Originating business financing for Canadian companies, specializing in working capital, cash flow, and asset based financing. In business 10 years – has completed in excess of $90 Million of financing for Canadian corporations. Core competencies include receivables financing, asset based lending, working capital, equipment finance, franchise finance and tax credit financing.
Info re: Canadian business financing & contact details:
7 Park Avenue Financial
Off. 905 829 2653
Cell 905 302 4171
7 Park Avenue Financial
Canadian Business Financing