By sprokop
Thousands of Canadian would be entrepreneurs in Canada clearly recognize the trend that franchising in Canada is a major industry and a leading contributor to the economy as a whole. You want to be a part of that trend!
So, that being said how does the entrepreneur translate that opportunity into his or her ability to kick start franchise financing funding in a manner that makes getting a franchising loan a success as a part of their overall entrepreneurial strategy?
Let’s share some solid advice on what type of financing you should utilize to successfully complete your new or existing business acquisition. Yes, existing franchises can be purchased and financed also!
The amount of money that you yourself put into the business is a key factor in your potential sales and profit success. But two questions immediately arise: Do those funds necessarily guarantee you success based on how much you put in, and secondly, where do you access the balance of the finances you require?
One somewhat intangible issue that also always comes up is the ability of the entrepreneur/ borrower to demonstrate how much experience they have in a chosen industry or business. So things like your own outlook on being an entrepreneur / business owner (it’s not as easy as you think) and matching your skills to the type of business you buy and finance are critical.
By the way, we think there are very few executives in even the largest most successful corporations in Canada that have the total skills involving sales, marketing, operations and finance as a total skill set . Those people are the real superstars.
Naturally one of the reasons you purchase a franchise is that you are buying into, hopefully, a proven system of a brand, business model, marketing and advertising assistance, etc.
OPM is important when it comes to franchise financing. That of course stands for Other People Money, which represents the balance o the funding you need for your franchise purchase. In Canada, along with your equity, or we’ll call it a down payment the balance of your financing comes from either a commercial finance company that either specializes in franchise finance, or one that can compliment the financing you need. A good example of that is an equipment finance company that can acquire and lease assets for you such as POS systems, other hard assets, vehicles, etc,
In general anywhere from 10 to 40%, sometimes more is required as a down payment or equity contribution to your business. We quickly add that that doesnt always necessarily mean that money is permanently contributed or ‘ tied up ‘, but you just must show that you have access to liquidity to get the busines off to a good start for working capital and growth purposes.
Two key points for the franchisee – a solid majority of the franchising loan scenario in Canada is done via the government BIL/CSBF program. It offers great rates, terms and structures for the acquisition of your business. Where the program falls down a bit is when it comes to a service type business where there are limited or no assets to purchase / finance.
Our other key point – have a crisp ‘ package ‘ in place when it comes to a business plan, industry overview, financial projections, etc. This isn’t the rocket science it sometimes seems when it comes to getting a good proposal in front of your lender.
You can’t afford to miss out on your business purchase just because of a poor presentation package, and it can also be easily accomplished by using an expert such as a Canadian business financing advisor that is experienced and has success and knowledge of franchise finance.
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Their new business is started by many newer franchisees after purchasing their franchise business opportunity only to find almost an infinite number of regulations and a procedure manual filled up with the “exact” and proper way to accomplish things. There will be no deviation and therefore, the franchisee miracles how all this will help him make money, since it appears following all these rules does just cost him money, actual money, and he acquired the franchise to make money not produce organization losses.Thus, the newest franchised store owner asks; “Will following all these rules and remaining in conformity of the franchise agreement by focusing to detail in the private operations manual basically help my franchise to great profits? And if that’s the case, how do I know this?”This is definitely, a good question, and you will find really a few responses. Number 1, you “must” follow the franchisor’s business plan, as agreed in the franchise contract or be terminated for cause and probably lose every thing. That’s the most important position, but I would ike to give you a softer side.The franchisor is continuously increasing their business design from actual procedures of 100s and sometimes 1000s of stores, they know what works and why. Failure to follow the “Best” way which has been documented and established will produce reduced effects in profit.Next, you should recognize that the franchising company wants as they get royalties, which are usually in a primary ration to your product sales money to be made by you. They want you to succeed and generate income. Because the more money you ingest, the more money you’ll produce, the higher for you and for your franchisor. Therefore, please consider all this.
