How easy it is to obtain financing for a franchise in Canada? It depends on the strategy you use. Most people want to succeed within a short period by developing a finance plan that works for both the franchise and the company.
Franchises were affected by the global financial crisis but now, they are back on their feet. So, can you get financing and how to go about this?
The first step is to find a strong franchiser and form a partnership with them. By partnership it is meant that you become the franchisee or subcontractor in legal terms. You need to prepare and present a sound financial package, so that both the franchiser and potential creditor are convinced that you are worth the investment. What should this package or plan contain? The following elements should be there: a plan on how to generate profits, an overview of your business partner, and your experience and background. Of course, the creditor must receive information as to the amount of cash you will have to repay the loan. You should develop a strategy on how you will be generating it. It is not enough to simply provide indicators that the franchise will make a profit. The franchiser himself can support you in the process of getting the financing, but on a whole you are on your own. What franchisers do is offer know how for a fee.
You need to have a good idea of your initial costs, which include hard costs and soft costs. The franchise fee and other non-tangible assets are soft costs, for example.
You should present the amount of money to be contributed to the business. The minimum is 10 percent, the maximum around 40 percent. In Canada, the BIL/CSBF program, a government-backed loan program, does the biggest portion of franchise financing. You will get a loan return term of 5 to 7 years, good interest rates, and no penalty in case of early repayment. You will not be required to back up the loan amount with collateral or other personal assets and funds.
No matter what type of franchise financing you want to apply for, you should have a relatively decent personal credit history.
In Canada, another prime lender with respect to franchise loans is TD Canada Trust. It offers a variety of financial services and products, efficient and fast services, and long branch hours. TD Canada Trust offers business loans with flexible terms of repayment, overdraft protection in the amount of up to $10,000 CAD, Business Lines of Credit, CSBFA loans up to $250,000, financial counselors with extensive franchise expertise and much, much more. CIBC also offers franchise financing to companies that have owner-operated distribution systems and consider transforming corporate stores into franchises. Applicants should present a strong balance sheet and have franchise requirements of more than $250,000. To get ahead of the news go to Canadian Personal Financial Blog.
