YOU’RE LOOKING FOR A FRANCHISING LOAN SOLUTION!
FUNDING YOUR FRANCHISE PURCHASE
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Financing & Cash flow are the biggest issues facing business today
ARE YOU UNAWARE OR DISSATISFIED WITH YOUR CURRENT BUSINESS FINANCING OPTIONS?
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EMAIL - sprokop@7parkavenuefinancial.com
7 Park Avenue Financial
South Sheridan Executive Centre
2910 South Sheridan Way
Oakville, Ontario
L6J 7J8
Financing a franchise in Canada comes with certain qualification criteria the franchisee must meet to achieve business loan success. What are these criteria, and what is the best way to overcome any obstacles in borrowing success for the Canadian franchisee entrepreneur? Let's dig in.
UNDERSTANDING QUALIFICATIONS FOR FRANCHISE FINANCE SOLUTIONS
Business loans come with qualifiers, and when it comes to a franchising loan there's no difference there. Criteria for qualification and approval of a franchise business are made by specialty franchise lenders, banks, and commercial finance companies which often supplement and complement a franchise finance package.
Your franchise agreement can typically cover a new franchise as well as an existing franchise and type of financing will vary greatly based on whether your franchise if asset based or service based relative to it's products or services.
PERSONAL GOOD CREDIT SCORE / HISTORY / NET WORTH OF FRANCHISEE IS KEY
Fundamental to any financing proposal is the required reasonable personal credit history of the borrower. But how is this determined? The majority of the time it’s simply based on two fundamental factors - the personal ' net worth ' of the franchisee, and his or her credit rating at credit bureaus. (There are two main credit bureaus in Canada and your score won’t be dramatically different at one of the other). It's a numerical scoring system wherein a score of 650 is in fact the ' magic number ‘.
THE NET WORTH STATEMENT
The net worth statement itself couldn’t be more basic - it’s a financial form that you complete that simply sows assets and liabilities - in simpler language, what you have and what you owe.
DO CANADIAN BANKS FINANCE FRANCHISES
In Canada banks do a great job of advertising small business and franchise programs - the general consensus from' the street ' though is that the aggressive advertising is sometimes not reflective of the actual approval possibilities. We'll leave it at that. But when it comes to banks in Canada they don't necessarily finance franchises directly ( without a lot of personal collateral backing up the loan ) - they do however have specific programs in place with some of the larger well known franchisors that can fast track approval. (Think hamburgers/clowns and hockey/donuts)
99.9% of the time franchisor financing directly is not available.
CHECK OUT THE GOVERNMENT OF CANADA SMALL BUSINESS FINANCING LOAN FOR FUNDING YOUR FRANCHISE
Where a Canadian chartered bank can do a great job for you (if you're working with the right banker) is under the auspices of INDUSTRY CANADA'S CSBF/BIL program, more commonly called the 'SBL ' loan. This loan program is similar to 'SBA LOANS' in the United States.
Here's where any franchising loan less than 1 Million dollars that covers assets and leaseholds (not working capital though) can be financed with solid terms - those include a good interest rate, low personal guarantee, no prepayment penalty, aggressive amortizations. The program also can fund real estate, although that is not typically used by most borrowers as that type of loan best suits a commercial mortgage.
KEY CRITERIA FOR LOAN APPROVAL SUCCESS
Other criteria for success in franchising loans include a solid business plan and cash flow projection, information on the background and expertise of the borrower, as well as effective narrative highlighting the current success of the franchisor. 7 Park Avenue Financial prepares business plans that meet and exceed the requirement of banks and commercial lenders
CONCLUSION
If you are looking to succeed in the franchise industry in Canada financing a franchise properly is key to your success. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your loan needs. Make sure you understand the financing solutions available for business success.
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Stan Prokop
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