Revealed ! How Funding Your Franchise Purchase Works In Canada – Franchise Financing Lenders

Updated: May 27, 2011

Clients always seem a bit overwhelmed with all the different aspects of putting together their total plan for their new franchise business. That includes choosing the business that matches your skills and investment, picking a location, finding employees, etc. But the biggest challenge seems to be the financing of that purchase via a franchise loan.

So is traditional bank financing available for a pure franchise loan. We're not 100% sure we can give you a ' yes ' on that one, but don't despair as you will soon see. We suppose if you have pristine credit, a high net worth, strong outside collateral and guarantors, etc you could facilitate a term loan to purchase your business. That unfortunately is not he profile of many of the clients we meet that are looking for loan funding.

So what are those options then? In reality the specialty finance firms that focus on providing only franchise finance are a very small number in Canada. There are more of them in the U.S., but that's not our turf! The specialty firms that provide the financing for the industry in Canada focus on the large well know brands that have lots of franchise units, strong franchisor financials, etc. That is only of course a small percentage of the total industry.

So whats the solution then if you're in the other majority, the hundreds or thousands of entrepreneurs who still require some major financing assistance. The answer is the Canadian BIL/CSBF program. It's a customized federal program for businesses in Canada, with a loan funding cap of $350,000.00.

This program allows a Canadian bank to be your new franchise funding partner - mostly because the loan is guaranteed by the government so there is only nominal risk to the bank. Would the bank lend you those funds outside the program? As we said, maybe... but we're sketpical.

So if you are a new entrepreneur with a reasonable record of business success and experience how exactly do you proceed to qualify for your franchise loan purchase financing?

We going to break that down into a few key areas - they are focusing on the size of your investment, determining your own equity or deposit into the transaction, and then focusing on key fundamentals required for a loan approval.

Key elements to focus on are ensuring you can prove you have a reasonable credit history. Prepare a business plan, or have a plan prepared for you , that focuses on you, the franchisor, the financial potential of your business , one that demonstrates you're ready to run a business, and , oh yes, repay that loan .

Typical investments by yourself in the new business range from 25-40%... and as far as that credit rating goes you should have a credit bureau score of 650+.

Is there one secret to getting a final approval? We think it's a bit more complicated than that, but not as troubling as you might think. Focus on a business plan, presenting yourself properly during the proposal process. We point out to clients that every new business, small and large actually goes through these same processes.

We recently came across a statement that maintains the four ' P''s of franchise success are people, purpose, payment and protection. In summary, a good business candidate, a good franchise pick, ability to show you will be successful, and a back up plan if things don't work out - example: spouses outside income.

Featured Research
  • 2017 Contact Center Software Cost Guide

    Are you paying too much for your contact center software? Are you satisfied with its capabilities, or do you wish it did more? These are questions most businesses don’t take the time to think about, even though contact center software is one of the most important investments that you’ll make. With a little bit of planning, you can end up saving money and still end up with better functionality. more

  • What You Need to Know About VoIP Security

    No matter the industry or area of expertise, a strong VoIP system is the perfect tool for any business looking to take both its internal and external communication to the next level. more

  • Are You Using These 5 VoIP Features?

    In large part, the success of your business depends on the strength and reliability of your team’s many communication networks—this includes your Voice over Internet Protocol system (VoIP). more

  • Video Conferencing Best Practices

    Video conferencing is quickly becoming one of the most important communication channels for both small and big businesses. As more businesses turn to this technology, expectations about the experience are also rising. It’s not enough to just offer video conferencing as a communication method. You also need to meet minimum audio and visual standards, and there’s even proper etiquette to consider. more

  • 10 Contact Center Myths Busted

    For most forward-thinking companies, the use of contact center software is on the rise. That said, in spite of contact center software’s sudden rise in popularity, a number of myths have begun to take shape. more