The priority of securing business money when you have selected and are starting a franchise becomes a lot more important as you focus on getting the business started and up and running .
Let’s discuss a few of the sources of capital in the Canadian franchise atmosphere, and we’ll talk about some tips and methods that have helped many other clients searching for Canadian business financing in the franchise environment.
There are 5 resources of capital that may successfully permit you to complete the financing of one’s new business. They include your personal equity injection into the business, i.e. your deposit, bank and institutional financing (its
s not what you may think, so stay tuned on that certain ) , asset funding via an independent finance company, and lastly a potential vendor take back from either the franchisor of the prevailing franchisee from whom you’re buying the business .
Let’s therefore backtrack a bit and hopefully give you some solid ideas and new information around how this funding is, inside our words ‘ cobbled collectively ‘ to give you a total financing solution for the new business.
It’s always exactly the same question when we talk to clients… ‘How much do we have to put in ‘… they’re of course referring to their owner equity investment into the continuing business. The simple truth is that the total amount varies when it comes to the financing portion of your organization. That amount is flexible and can vary anywhere from 10 – 50 % depending on the size of the funding and the amount of working capital you wish to have on hand d on day as soon as that will enable you to finance the business enterprise properly .
Another tip we’ll share in the above mentioned ‘ owner equity ‘ area is merely that oftentimes some franchisors will actually mandate how much you ‘ have ‘ to set up. We therefore recommend to all clients that they get yourself a clear understanding in advance so are there no surprises. In protection of the franchisor they’re most likely relying on their very own experience which allows them to possess determined over time what it takes to successfully run and grow among their units in their franchise system.
So how exactly carry out the banking institutions in Canada participate in the starting of your franchise? Could it be as basic as approaching your bank and determining what company money they will lend to finance a franchise? Not we tall customers really. We have hardly ever if ever seen a direct term loan to cover up the funding of a franchise. Yet somehow the banks do participate in the majority of the franchise financing in Canada. How? They piggy back on a particular government program called the BIL/CSBF programme. This loan will be underwritten by Ottawa, and contains very generous conditions and terms around structure and price. Unbelievably you are actually only guaranteeing individually 25% of the loan, which is another benefit.
So our cobbling collectively of a financing bundle is getting now there – another great strategy is to finance separate individual assets with an independent lease firm. This type of asset financing is simpler to get accepted, and will cover a significant portion of any assets that require to be financed.
We spoke of a potential vendor get back from the franchisor or existing franchise within the purchase package. We will share with you several tips and responses with this one – specifically that you should not fully depend on getting this kind of financing in place. Occasionally you may be successful, may moments you wont. Why? Simply because the franchisor or present franchisee is motivated to sell you a franchise, not finance it!
Speak to a reliable, credible, and encountered Canadian business financing advisor in your community of starting the franchise and obtaining the right business money in place to permit you to complete your brand-new role as a Canadian entrepreneur.