Business Franchise Loan Challenges Here’s How Franchising Loans Really Work In Canada

Business franchise loan challenges in Canada? We’re the first to admit that the concept of getting a ‘ tip ‘ in business is not always a good thing but we’re drawing from successful experience in franchising loans that assist clients who are serious about entering this type of business.. and being successful!

There is of course a long journey between the time you decide to purchase a franchise to the time that ribbon opening! Along the way you have been vetted by the franchisor, investigated, probably spent some time in training and orientation, and… Oh yes, we forgot… faced the finance challenge of buying the business!

Many franchisees either struggle or are uninformed about how much equity, aka ‘ down payment ‘ they have to put in the business. We forgive them for this confusion because it’s a three pronged issue –

1. How much capital the owner can comfortable raises or put in

2. How much equity capital is required by the type of financing you ultimately enter into?

3. How much capital in some cases that the franchisor insists on as a prerequisite to entering into their program – typically that amt. is one to listen to carefully as its often based on the franchisors experience as to what it takes to be financially successful, not just ‘ sales and revenue successful ‘!

While Canadian chartered banks have in essence recognized and embraced the franchise industry as a key borrowing segment it is very important to note that almost never to they finance franchises directly – even less so when it’s not an ‘ asset heavy ‘ deal . So what our banks do is to carefully tailor some large national programs around the franchisors willingness to work with them in a worst case scenario – i.e. The financial failure of your business!

If you are fortunate enough to acquire a business that’s a part of a very large and successful respected chain you should be congratulated and might find some financing solace. If that is not the case one of the best possible solutions for your financing decision comes from an acronym. And that acronym? It’s the BIL loan program which hundreds/thousands of franchisees use to facilitate the financing of their franchise if the purchase price is under 350k – which is the program finance cap.

Whether you are borrowing from a specialty franchise lender (yes they do exist) or from a bank or commercial finance firm it’s important that the franchisee demonstrate reasonable personal financial history. That of course means that you can demonstrate that you have run your personal finances in a manner that reflects how you would run your franchise.

Lenders and even the franchisors themselves can easily verify your personal financials via credit bureau reports, statements of personal asset, etc.

Understanding the up front challenges of franchising loans will save you time, money and ultimately guarantee financing success. Seek out and speak to a trusted, credible and experienced Canadian business financing advisor who can assist you with your business franchise loan needs.