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Franchise Financing in Canada is considerably different than in the United States. When we meet with franchisees looking for Canadian financing options they want to know what types of financing they are able to finalize for the purchase of a franchise. Although some financing is geared specifically to new franchises, many new entrepreneurs are also looking to purchase an existing franchise in a wide variety of industries. The reality of franchising financing is that the type of financing that you arrange for your new business has an effect on the overall structure and success of your new venture. We are discussing franchise financing, but may of the financial aspects of a financing touch on other aspects of your business plan. For instance there are franchisee fees; royalty rates that have to be dealt within your cash flow projections, the extent of your personal guarantees, and the overall debt structure of your financing Vis Vis interest rates, payments, term of the loan(s), etc. If you are seriously considering the purchase of a franchise in Canada it is strongly recommended that you become 'informed '. Naturally there is the obvious financial and business due diligence that you would hopefully look at if you were purchasing any business, whether that business is a franchise or not. Those issues include validating information about your franchisor, reviewing their financial statements, speaking hopefully with other existing franchisees, and determining your basic financial rights and obligations in the franchise agreement. The funds you will be borrowing revolve around some key areas – Franchise Fee Leasehold improvements Location buildout Equipment Working Capital You r goal should be to secure a total funding package that best reflects your personal financial situation, as well as the financial goals of your new business . In Canada there are only one or two options at best that would finance every aspect of your financial needs. The reality of franchise financing in Canada is that financing is best accommodated by a combination of a number of solutions that, when completed, have provided you with a full financing for your business goals. Every franchisee asks us 'What are my chances of being approved '? We can categorically say that if you do not prepare a proper presentation package that your chances of being approved are close to nil! Whether you are contemplating a takeover of General Motors, or buying a pizza franchise you must be able to recognize what a lender is looking for. We don't have Canadian statistics on declines for franchise financing but on U.S. study indicated that 80% of small business loans are in fact declines simply because of lack of information and preparation of a strong financial package . If you are not capable of preparing such a package personally then we recommend you use the services of a business financing advisor who has credibility and experience in this area of Canadian financing. From a timing perspective a good presentation package will allow you to complete a financing in less than 30 days with the proper focus of yourself and or your business financing advisor. That package should include resume of experience, a business plan, projected cash flows and profits (i.e. how will the loan be repaid) and other miscellaneous information as may be required. Typically these items would include your credit history report, your franchise agreement, premises lease, etc. So whats our conclusion? It is simply that doing your investigative homework, being prepared and utilizing the right people and other resources will maximize your chance of financing approval. Stan Prokop is founder of 7 Park Avenue Financial - www.7parkavenuefinancial.com Originating financing for Canadian companies,specializing in working capital, cash flow, and asset based financing , the 6 year old firm has completed in excess of 45 Million $ of financing for companies of all size . For info and free consultation on Canadian business financing and contact details see : http://www.7parkavenuefinancial.com/franchise_financing_in_canada_2.html
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