Sources Familiar With The Matter Say Franchise Financing Loans Are .. Available In Canada!
OVERVIEW – Information on franchise loans in Canada . Franchisees have numerous questions on franchise costs financing and here’s some answers
Franchise loans in Canada are, unfortunately still a bit of a conundrum to many entrepreneurs contemplating franchise costs financing alternatives and ‘ best practices’. We were watching the news the other night and heard the phrase: ‘ Sources familiar with the matter …’ and couldn’t help but think many of our franchisees wouldn’t mind talking to those ‘ informed sources ‘ on the challenges they face in financing their business purchase. Let’s dig in.
It’s important to understand the types of financing that are required for purchasing a franchise. Predominantly that’s a term loan, but depending on the type of franchise and industry you have chosen it’s important to give thought to working capital issues around receivables and inventory, as well as the ability to finance future equipment and leasehold needs to stay competitive.
While the franchisee must be in a position to commit some level of personal capital to the business that typically comes only at the initial purchase stage, As your business is established, has credible financials and cash flow history finance alternatives not requiring additional capital become available .
While the amount of capital from your personal investment will be different for every franchise what makes that amount necessary typically revolves around size of the franchise, franchise quality and reputation, and financing breakdown.
Service franchises always are going to have a lower total financing cost because they are not capital intensive. That’s great right? Not necessarily though because service franchises are difficult to finance for the same reasons, there are no tangible significant assets.
We deal with numerous clients that have in fact ‘paid cash ‘ for the entire costs of a turnkey franchising operation. Guess what though? As sales and revenue projections (dreams?!) don’t materialize fast enough the business runs out of working capital. So the franchisee finds themselves asset rich and cash poor.
Fortunately there are effective strategies available to refinance the business and often save it.
Repayment is a concern, mostly for your lender or lenders! So it’s critical to spend the right amount of time and access the right expertise in a proper business plan and cash flow. The key things you need to address are realistic sales projections, as well as understanding that in the cases of selling on credit sales does not equal cash. Naturally the amount of sales and profits you need to at a minimum break even are important… although hopefully no business owner enters into business with the goal of only breaking even.
If you’re looking for those ‘ Sources familiar with the matter ‘ when it comes to franchise loans in Canada seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you in addressing franchise costs financing in a manner that suits your needs.
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