Engineering the right Franchise Financing Loan In Canada

OVERVIEW – Information on franchise financing solutions in Canada. Funding franchises successfully is dependant on a number of key factors

Funding franchises in Canada shouldn’t be difficult, but for many… it is. Let’s look at the right way to approach franchise financing in Canada, which by the way includes simply the right information and the proper assistance. Let’s dig in.

After the potential franchisee has spent a significant amount of time in seeking out the right franchise opportunity it’s critical to engage your franchisor in the right discussion around financing requirements. While they directly don’t finance your new business they can often provide both guidance and direction on how franchises in their system are in fact financed.

In Canada some of our chartered banks do in fact have ‘ programs’ in place with large franchisors that have significant ‘ branding ‘. (Think donuts/hockey player and clowns/burgers as an example!) . It’s these types of relationships that can often help a large financing challenge become easier.

More often than not though, as much as he or she doesn’t want to be, the franchisee is in fact on their own. So if they don’t have the expertise to understand the lender landscape in Canada they are somewhat doomed to failure.

For any type of business financing in Canada its all about criteria, understanding, and meeting! Being armed with the right information required by a lender will get the ball rolling. That information typically is a solid business plan/executive summary, a financial road map that includes an opening balance sheet and cash flow projections, as well as the usual information around the owners financial worth and credit history, etc. 99.99% of franchisees incorporate their business, or buy an incorporated business, so some of those details need to be attended to also.

The lending landscape for franchising in Canada, unlike the U.S., can hardly be called ‘ robust. If you are dealing with a ‘ specialized’ franchise lender the solid alternative is utilizing the Canadian govt SBL loan. It funds a lot of new businesses in Canada, and the franchise industry here has found it’s well suited for business funding. It’s the Canadian equivalent of the ‘ SBA ‘ program.

Key aspects of the SBL program in Canada include, but are not limited to:

Limited personal guarantee

Competitive start up pricing on financing

Ability to finance assets as well as leaseholds

Solid structures including 5-7 year typical amortizations
Some potential franchisees might think that they might receive assistance around the actual final price as agreed to by you and the franchisor. This is NOT the case.

Additionally many entrepreneurs choose to buy an existing franchise for a variety of reasons. Here again the actual value of the franchise being purchase must be determined by yourself and the seller. As a general rule franchises in certain industry segments are sold and valued as a % of the actual sales revenue. For example an existing automotive transmission business typically might be valued at 40 – 50% of actual annual sales revenue. A QSR (quick serve restaurant) might typically go for 30% of actual revenues being achieved. Suffice to say many other factors should be considered when valuing and financing an existing franchise.

In financing a franchise in the Canadian marketplaces you should focus on size of investment required, break even analysis on sales, expected income for the owner, and ultimately whether the opportunity is a good ‘ Return on Investment ‘.

In Canada in certain cases even franchisors themselves will need financing of some sort. Here issues such as # of corporate/franchise locations, gross chain revenues, and exit or repayment strategies must be on the table.

If you are looking for the right way to ‘ engineer’ franchise funding in Canada seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your franchise financing 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:


Greg LaBella
7 Park Avenue Financial
Off.   905 829 2653

Cell   905 302 4171


7 Park Avenue Financial
Canadian Business Financing