The Secret Ingredients In Canadian Franchise Loan Finance - Making Loans For Franchise Work

Updated: April 08, 2011

But is it possible to fail? Unfortunately yes... and even if you have a plan but have a poor franchise loan finance strategy in place for your business, coupled with your inability to fit the mold for your franchisors plan... well you know the rest. Those are some of the ' soft areas ' of potential failure, i.e. things like people skills, ability to manage a business, or simply not keeping to your franchisors formula... those are all ingredients for failure .

But our ingredients are today focusing on the hard factors getting loans for franchise finance in Canada.

Two of the most important ingredients to your success are your ability to make a reasonable equity investment into your new business, so that you are both not burdened with debt, but at the same time meet the criteria for specialized franchise loan programs that exist in Canada.

While one or two firms in Canada specialize in large multi million dollar loans for well known larger business blue chip type franchises the majority of clients we meet tend to be looking at a restaurant or service type franchise that typically comes in at the 200- 400k range.

So what key ingredients are part of the recipe for franchise financing success. They are, in our opinion, as follows - maximizing your ability to qualify for special franchise loan scenarios as offered by Industry Canada's BIL / CSBF program. This program alone finances most of the franchises in Canada and can help you turn your dream and passion for a franchise purchase into reality.

We're going to assume you have thoroughly researched your business and you've got what it takes, include some experience or relevant management background for the industry. What else is required for the financing plan?

Some of those key ingredients are a business plan, prepared by yourself or a professional, and by the way ... a few words about that plan. It doesn't have to be 100 pages. It should be a clean simple document highlighting yourself, your franchisor, the industry, and most importantly, take some time to make sure the numbers work. Make cash flow assumptions that are reasonable; and by the way, don't forget to show the lender how they are going to get paid back for the franchise loan,

The majority of loans for franchise in Canada do fall under the BIl loan program we mentioned. It has great rates, terms and structures considering you are in effect a start up business.

Have we forgotten any other secret ingredients? Perhaps one, which is your own credit history. Franchisees with a decent personal credit history have a much greater chance of success. Yes, you might have a good down payment and some solid collateral or assets in the business, but that personal credit history dictates how you run your personal financial life, which transcends clearly into your new franchise business.

Featured Research
  • Eight Ways You Should Be Using Contact Center Reporting

    Every day, your contact center collects critical data that can be used to drive strategic improvements to your efforts in the future. But that data is meaningless if you don’t know how to access and analyze it. The key to do doing both is using reporting features. By understanding how to use reporting tools, you will gain much greater insight from the data you are collecting. more

  • Is Your Phone System Stealing Profits?

    Having the wrong phone system can dramatically cut into your profits. Despite this, many businesses just sign up for a plan or platform that seems ‘good enough’. If you haven’t carefully considered your options and the included features, there’s a very good chance that you are leaving money on the table in some way. more

  • Best Video Conferencing Features for Business

    Most businesses are currently underutilizing their video conferencing software because they aren’t aware of the different ways it can be used. Understanding the different features of video conferencing software can be critical to getting the most out of your investment. These features often vary from one option to the next as well, so it's important to do your homework before choosing a specific service. more

  • Phone System Technology Showdown

    VoIP and IP telephony are often misconstrued as being the same type of phone system, but the truth is they operate on different technology and deployment methods. This guide will explain the differences between VoIP and IP, go into the pros and cons of both VoIP and IP-PBX, and give insight into which type of phone system will benefit your business the most. more

  • 8 Ways the Cloud is Changing ERP for the Better

    What if there was a tool available that allowed for you to save up to a quarter of your operational costs? Studies have shown that Enterprise Resource Planning (ERP) solutions enable businesses to access accurate, real-time information about daily operations which allow for the reduction of operational costs of up to 23% and administrative costs of up to 22%. more