What’s Good And Not So Good About Franchise Financing In Canada : Franchisee’s Are People Too !

OVERVIEW – Information on the positive and negative aspects of the Canada small business financing program as it relates to franchise loan solutions

The Canada small business financing program , properly approached, is a great vehicle to complete the financing of a franchise in Canada. Knowing the limitations of the program, and how to accentuate the benefits become a classic win/win. It’s as close to a proven ‘ formula ‘

as we can get, so let’s dig in.

While franchising is as close to ‘ rampant ‘ as we can get these days many franchisees still view the whole purchase/acquisition and of course financing with some fear and trepidation. It’s essentially fear of the unknown we suppose.

While not specifically designed for the franchise industry the Canada small business financing program over the years has evolved into a major lender in Canadian franchising. The program, commonly called the govt SBL (small business loan) loan is government underwritten and sponsored, but administered and managed via our Canadian chartered banks and a very small number of misc other financial institutions.

It’s not hard to see why banks flaunt their interest and expertise in franchise financing – as their loans are in a large portion guaranteed by the government. Who wouldn’t want a piece of that action?! While some franchising loans might be made by banks to the largest and well known brands (think ‘ clown and a golden arch) outside the SBL program they are clearly not the majority.

While the requisites for the program are certainly not onerous it is often what the program does not do that limits some franchisees from reaching financing success for their venture.

And those prerequisites? They include:

Reasonably clean personal credit and financial history of owner
Proof of acceptance from their chosen franchisor
Premises lease co-terminus with loan amortization
Business plan/cash flow and management bio

Surely everyone recognizes that that type of information is standard within any type of business financing in Canada.

So where do things go awry? As we said it’s knowing when the program will not work from you.

Here’s where the limitations of the program need to be clearly understood. They are as follows:

– The program is not 100% financing – the owner must have a reasonable down payment, aka ‘ equity component’

– The SBL loan is a term loan, not a cash loan, and not a revolving line of credit type facility – It is a term loan with equal fixed monthly payments, typically spread over a 3-7 year term that suits the borrowers

– The loan only finances equipment and leasehold improvements – That means franchise fees, working capital needs,

– The SBL does not finance inventories, and it doesnt provide financing for the actual sign up franchise fees

– The Loan cap is 350,000.00 so franchises requiring financing additional to that often become problematic when it comes to the SBL

If your franchise needs can’t be financed by a direct franchise commercial lender explore the Canada small business financing program. But beware, as we have noted, of what the program can… and can’t do.

For further clarity and probably faster approval seek out and speak to a trusted, credible and experienced Canadian business Financing Advisor with a track record of success in the franchise area of the Canada small business financing program.

Author; Stan Prokop – founder of 7 Park Avenue Financial


Originating business financing for Canadian companies , specializing in working capital, cash flow, asset based financing . In business 10 years – has completed in excess of 80 Million $$ of financing for Canadian corporations . Core competancies 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 = Canadian Franchise Financing Expertise

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