What Happens When Franchise Business Loans Work?

OVERVIEW – Information on franchise business loan financing in Canada. What special info and insights and expertise is require to successfully finance the franchisees’ entrepreneurial dream and vision

When Franchise business loan financing works in Canada it’s easy to see why the franchisee and entrepreneur feels like they just go all the benefits of a private school education. We won’t weigh in on the benefits of private versus public education of course; we will say though that if you have the right financial advice, info, and industry expertise contacts you’re well ahead of the pack. Let’s dig in.

Key to understanding franchising finance needs is the ability to obtain the right type of term loan, credit line, or other type of financing that ‘s related to a franchise – for example equipment financing.

A lot of those types of borrowing facilities also relate to the amount of personal equity, the proverbial ‘ down payment ‘ that comes from your own financial resources. In fact a lot of the up front charges related to a franchise acquisition can generally not be financed – they might include things like franchise fees, incorporation costs, etc.

Many clients we work with initially under estimate the total amount of financing they need for their purchase from the franchisor. A lot of that pain and embarrassment can be avoided by clear up front discussions with your franchisor as to the total amount of capital required to facilitate a successful acquisition, allowing you also to run and grow the business. A good example here might be a credit line if your business in fact needs one. Business such as the hospitality industry often operate on just a cash basis, which necessitates less working capital.

In some cases the franchisee might be considering the re-purchase of an existing franchise... That’s a whole different ‘kettle of fish’ as you’re dealing with the owner of an already existing franchise. Key here is to determine the right valuation of the business, as well as clearly uncovering the motivations of the seller who now wants to sell the business. While there are some 100% legitimate reasons for selling, it’s also evident that many franchisees realize they cannot obtain the sales and profit potential they had hoped. Bottom line you don’t want to be purchasing a franchise that is somewhat in ‘ death spiral ‘ mode.

A well crafted business plan, prepared by yourself, your franchisor, or an experienced Canadian business financing advisor will allow you to see all the inflows and outflows of cash from day one.

It’s a great tool for any business, but for the franchisee it’s critically important as they must achieve certain revenue milestones to meet royalty fees, payments on a term loan, etc. Just having a sensible sales and cash flow forecast prepared allows you to see when you’re reaching breakeven and profit goals you have set.

Seek out and speak to a trusted, credible and experienced Canadian business financing/franchising advisor who can assist you with your own version of ‘ private school’ info when it comes to successful franchising 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:


Greg LaBella
7 Park Avenue Financial
Phone = 905 302 4171
Email = greg@7parkavenuefinancial.com

7 Park Avenue Financial
Canadian Business Financing