Notes From The Trench – Canadian Financing For Franchises – Get Your Business Franchise Loan Right

Updated: June 24, 2011

It's pretty clear to yourself that when you're contemplating the purchase of a franchise you will need financial assistance via a franchise loan to complete your project. Those funds in effect compliment or complete your equity, i.e. your own investment into your new business. We point out to clients that the same challenges and issues pertain to whether you're purchasing a brand new ' turnkey ' operation or if you are purchasing from an existing franchisee who is selling.

P.S. Don't forget to ask why the franchisee is selling?!

So where is commercial lending at Vis a Vis Canadian franchise financing? Do you have to do a lot of homework to investigate how to successfully complete a franchise finance loan?

Naturally in a perfect world ( its not always perfect as you may have observed ) you're looking for financing that completes your transaction, has reasonable rates, and provides you with a term on the loan that is suitable for both cash flow and repayment .

In Canada franchises are financed successfully in a number of manners - but it's certainly not a large choice, so it's important to focus early on, on what you can achieve and with whom. There are one or two specialty franchise finance firms but these firms typically focus on the relationships they have with some of the largest an well know franchisors, many of whom have franchises for sale in the 1 Million dollar ++ range . That isn't for everyone of course.

It's actually the Canadian government (that's a surprise!? that has a huge role in financing for franchises in Canada, but in a somewhat indirect method. They sponsor a loan program called the BIL/CSBF loan that provides financing for a huge amount of franchisees in Canada. The program is clearly a champion of small business, on which franchising is of course based - independent owners and operators working with success franchisors in Canada.

The government in effect guarantees a very large percentage of the loan, allowing you to receive those rates, terms and structures that are absolutely some of the best financing terms in Canada, bar none.

What do you need to do then to get your franchise financing house in order then? It's not a cake walk, but quite frankly is not as hard as you think to accomplish your goal of a success business franchise loan.

You want to be able to ensure that you're prepared - naturally you would do that for any business financing you would ever contemplate. You need to be able demonstrate a reasonable personal credit history ,as well as some level of either general business knowledge or industry specific knowledge relative to the industry within which your franchise is located, i.e. restaurants, service business, etc.

It's important to have a clear cut business plan that demonstrates how your financial package looks, i.e. how the combination of your own equity and the loan will allow you to acquire the franchise, and, of great interest to the lender, repay the loan.

Will your franchisor help you in all this? Yes... and no. It's our observation that franchisors are focused on selling franchises, not financing them! So be prepared to carry the weight of most of the work in completing you're financing for franchises.

Featured Research
  • Harnessing the Power of Speech Analytics

    The conversations between your customers and agents contain invaluable insights—if you have the right tools to easily interpret and act on this dialogue. Unfortunately, most organizations waste time manually mining only a subset of customer interaction data, or worse yet, do nothing with it at all. Speech analytics is an incredibly powerful tool for contact center leaders. It easily delivers real-time visibility into the full customer journey and agent responses, which are essential for driving higher customer satisfaction and business success. more

  • Budgeting for BI in 2018

    Is your business ready for Business Intelligence (BI) software? As BI software continues to improve, more businesses are moving to adopt BI sooner rather than later. Before you make that commitment though, it pays to figure out exactly how much money it will cost you to implement. more

  • Gartner Report: Gartner Magic Quadrant for Contact Center Infrastructure, Worldw...

    The 2017 Magic Quadrant provides Gartner’s annual analysis of the contact center infrastructure vendors. The report examines the innovations driving the market and compares vendors based on completeness of vision and ability to execute. more

  • Forrester Report: Artificial Intelligence with the Human Touch

    Artificial intelligence (AI) can’t replicate the human touch, but it can ease your agents’ burden by handling many simple, repetitive requests. A new Forrester Consulting paper offers a look at the strengths and weaknesses of both AI and humans independently, yet how blending them together can give your customers the seamless end-to-end experience they expect. more

  • eBook: Not All Cloud Contact Center Platforms Are Created Equal

    Everyone says they’re “in the cloud,” but most technology leaders would agree that not all clouds are created equal. When evaluating a cloud contact center solution for your business, it’s important to understand the difference between a true Cloud 2.0 application and traditional software, including which features to look for and why those features are important. more