5 Franchise Business Financing Tips For Entrepreneurs In Canada
Expert advice is always a good thing so wouldn't it be great to get some solid advice
on one of the larger decisions you'll make in your business life buying and financing a franchise in Canada. Franchise business financing is specialized and you want to ensure you have the proper ammunition to make the acquisition of your business successful. And that means of coruse a new turnkey franchise, or, in some cases, the purchase of a franchise from an existing seller or franchisor.
Let's explore 5 key tips that should ensure your business financing success they are as follows
Pick the right franchise finance partner
Ensure the type of financing offered meets your needs
Don't count or rely on the franchisor itself for financing that rarely if ever happens
Understand franchise lending criteria in advance, and then ensure you can qualify for those criteria
Ensure your franchise is financed for purchase as well as ongoing needs
Let's walk through some of the key points in those 5 tips allowing you to feel more comfortable about the franchise financing process.
In Canada franchise financing is broadly available and at the same time very boutique and specialized in nature. What do we mean by that statement? Well the majority of franchises in Canada are financed under a special government program called the BIL or CSBF program. It is underwritten and supported by the government, but in case you haven't seen a government franchise financing office on your corner, here's the deal on that! The program is administered by Canadian banks, but under the government auspices. We tell clients that only a limited number of Canadian bankers understand the program, can move through it efficiently, and get you approved.
We mentioned a key point in our Tips that indicated you must understand the criteria for both the above mentioned program, as well as other financing available. We advise clients that general criteria for a franchise loan are as follows : decent personal credit history , a respectable down payment ( more about that later ) , some industry experience in the type of franchise you are purchasing, and you must be a Canadian citizen or landed immigrant bottom line can you legally borrow in Canada . Broadly speaking satisfying those criteria should allow you to get out of the gate quickly and commence your franchise financing process.
That brings us to another tip we noted, who exactly is your franchise finance partner. For a starter, given the unique nature of franchise financing we recommend you work with a trusted, credible and experienced franchise financing consultant. He or she will guide you through the finance maze and make you aware of all issues and conditions on an up front basis. Secondly, don't count on your franchisor to provide financing they like selling franchises, not borrowing on their own account to get you started. Having said that a good franchisor will give you guidance on their own chains experience in how their franchisees are typically financed. Alternative to the bank franchise finance program sponsored by the government are a handful of specialized financed companies. We also have actively recommended working with equipment financing firms to finance some of the hard assets in your new business. That rounds out the strategy quite nicely.
Purchasing the right franchise and getting it financed is job 1. Job 2 should be ensuring that you have ongoing financing needs covered for things such as working capital, additional equipment or assets that might be needed down the road, staff and sales expansion, etc. You can address this most properly by carefully tuning your initial business plan to ensure that ongoing sales and costs can be financed properly. Make sure the business can support any debt that you take on at a future point in time.
If you cover off carefully our 5 'Tips' you are well on your way to entrepreneurial success in franchise financing in Canada.
by: sprokop
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