It’s sometimes just the idea of wondering how financing for franchises works, and when in fact you will be approved for a small business franchise loan that gives you discomfort. Let’s examine whats occurring in franchise finance today out there in the trenches, aka real life!
It’s pretty crystal clear to yourself that whenever you’re contemplating the buy of a franchise you will need financial assistance with a franchise loan to complete your project. Those funds in place compliment or complete your collateral, i.e. your personal investment into your new business. We point out to clients that the same problems and problems pertain to whether you’re investing in a brand new ‘ turnkey ‘ procedure or in case you are buying from an existing franchisee who is selling.
P.S. Don’t forget to inquire why the franchisee is selling?!
Where is commercial financing at Vis a Vis Canadian franchise financing? Do you have to do a lot of homework to investigate how to successfully comprehensive a franchise finance loan?
Naturally in an ideal world ( its not necessarily perfect as you may have observed ) you are considering financing that completes your transaction, has reasonable rates, and you with a term on the loan that is suitable for both cashflow and repayment .
In Canada franchises are financed successfully in several manners – but it’s certainly not a large choice, so it’s important to focus early on, on what you can achieve sufficient reason for whom. There are a couple of specialty franchise finance companies but these firms typically concentrate on the relationships they will have with some of the largest an nicely know franchisors, many of whom have franchises for sale in the 1 Million dollar ++ range . That isn’t for everyone of course.
That it is the Canadian government (that’s a surprise!? which has a huge function in funding for franchises in Canada, but in a somewhat indirect method. They sponsor a loan program known as the BIL/CSBF loan that provides financing for plenty of franchisees in Canada. The program is clearly a champion of small company, which franchising is of course based – independent operators and owners dealing with success franchisors inside Canada.
The national government in effect guarantees a very large percentage of the mortgage, allowing you to receive those rates, terms and structures which are absolutely some of the best financing terms in Canada, bar none.
What do you must do to really get your franchise financing house to be able then then? It’s not a cake stroll, but quite frankly isn’t as tough as you think to perform your goal of a success business franchise loan.
You want to have the ability to ensure that you’re prepared – naturally you’ll do that for any business financing you’ll ever contemplate. You need to be able demonstrate a reasonable personal credit history ,along with some level of either general company knowledge or industry particular knowledge relative to the within which your franchise is located, i.e. restaurants, assistance business, etc.
It is critical to have an obvious cut business plan that demonstrates how your financial package looks, i.e. how the combination of your own equity and the mortgage will allow you to acquire the franchise, and, of great interest to the lending company, repay the loan.
Will your franchisor help you in all this? Yes… and no. It’s our observation that franchisors are usually focused on selling franchises, not financing them! So be prepared to carry the pounds of most of the task in completing you’re funding for franchises.
Want some assist? There’s lots out there. Consider speaking to a trusted, credible and experienced Canadian company financing advisor who is able to assist you to achieve your goal as an effective franchisee in the booming Canadian franchise market.