Do You Have What It Takes To Get A Franchise Loan In Canada

OVERVIEW – Information a achieving success in a franchise business loan in Canadian franchising . Franchising finance solutions depend on what you’ve got and how you show it! Here’s why and how

A franchise business loan in Canada seems to be viewed by some as a ‘gamble’ on franchising finance success. We certainly have never looked at it that way, and if you follow that famous Boy Scout motto (BE PREPARED!)
you’ll be viewing financing your franchise in terms of a strategy, not a gamble! Let’s dig in.

Various types of financing might be required by a franchisee. The most common is probably a term loan – typically with a 5-7 year term, fixed interest rates, and a therefore predictable monthly outflow of cash in terms of the loan. Naturally the amount of the purchase, coupled with your down payment or equity installment determines the ‘ monthly damage’!

In almost 99.99% of the time your ability to repay the loan will come from sales and profits you generate in the business. That’s where a serious amount of time needs to be spent on your cash flow forecast – it’s a task not loved by all but very necessary. And frankly if you don’t want to do it yourself there is a lot of help available from your banker, accountant, or a Canadian business financing advisor.

We often hear the expression that you shouldn’t assume anything. However, assumptions in your cash flow forecast are critical relative to revenue growth, expenses, owner draws, future investments required in the business, etc.

Security for a franchise business loan in Canada typically is the personal guarantee of the borrower, as well as the collateral financed inside the business. That typically exists of equipment and leasehold improvements.

If the franchisee is dealing with either a specialty lender, or utilizing the Canadian small business loan program to finance the business typically no outside collateral will be required. That tends to be great news for the wives and husbands of new franchisees who don’t have to put the family home on the line. We see many franchise owners that mortgage their homes to purchase a franchise – in hindsight this tends to be a failed strategy – in essence they have ‘ too much’ equity in the business and are putting personal asset at risk in case of problems down the road .

As we have hinted the success you have in financing your new venture is clearly tied to your business plan / executive summary. Many clients we meet have that ‘ glazed look’ when we start discussing preparation of their plan. It’s a lot more common sense than you think.

Elements of your plan will hinder, or guarantee franchising finance success. Our key tips in this area include:

Focusing on the basics – start up risk mitigation. Cash flow & profit projections

A clear summary of how revenues will be achieved and how expenses can be contained

Strong focus on the franchisor, the industry you are entering (hospitality, service, etc), client growth, etc – Some good industry data helps re trends, competition, etc

Conservative financial projections that make sense when it comes to making money and paying your franchise loan(s)

In fact the business plan can be a great document to revisit on a monthly or annual basis to determine what’s working, what didn’t work.

Take the gamble out of franchising finance risk – Seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success who can ensure you’ve got what it takes to be a franchisee entrepreneur.


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:


Greg LaBella
7 Park Avenue Financial
Off.   905 829 2653

Cell   905 302 4171

7 Park Avenue Financial
Canadian Business Financing