Financing a Franchise in Canada
Clients who’re contemplating investing in a new or existing franchise in Canada will always be asking how financing a franchise works in Canada. The Canadian franchise market is obviously huge so they cover nearly every kind of business in Canada. Certainly nearly all franchises appear to stay in the Hospitality and QSR (Quick Service Restaurant) industry, however in actuality all types of business has some kind of franchise model mounted on it. The franchise concept is many an entrepreneurs’ response to the Canadian imagine growth and profits through business possession and self employment.
It shouldn’t be an unexpected to Canadian entrepreneurs that there’s nobody single choice of solution for financing a franchise in Canada. In fact numerous options exist, and perhaps you have to use a mix of these sources to accomplish the financial lending effectively.
The primary supply of financing in Canada for franchising is really a government ‘subsidized’ and ‘guaranteed ‘loan from the us government. This program has two names, the CSBFL, and also the BIL. They are acronyms for that government’s formal reputation for this program.
We firmly think that this is actually the best program, bar none, for rates, terms, and loan structures in Canada. As the program can be obtained and relevant to any or all Canadian companies nearly all companies in Canada which are franchised come under the program.
That’s what’s promising, the under great news is the fact that oftentimes you can’t totally complete your business franchise purchase with this particular loan financing onto it own. Can you explain that? Due to the fact this program is structured and it has limitations on which could be financed.
So what can be financed under the program? The reply is 3 products only-
Therefore if your purchase of a brand new franchise involves anything apart from these 3 products additional financing sources are essential. Individuals additional financing sources have a tendency to originate from your very own sources, other structured term loans, and perhaps a vendor get back from either the franchisee you’re purchasing the existing business from, or potentially the franchisor itself. Don’t focus an excessive amount of around the latter because in situation you have not suspected right now, franchisors or master franchisors are curious about selling a franchise to allow them to build another franchise unit to their network! They are not within the finance business by itself.
The advantages of the franchise loan structure from the BIL/CSBFL program are significant. For any starter they carry merely a 25% personal liability, and next the rates (3% over prime) (This Year Canadian primes remains really low!) are fantastic. Underneath the spirit from the program the borrowed funds finances 90% of the qualified expenses. Try not to believe that merely a 10% equity or personal investment on your own will enable you to get approved. You need to generally be turning over of between 25% as your very own contribution towards the business.
In conclusion, financing a franchise in Canada is really a unique niche kind of financing. You won’t want to get it done wrong the very first time and endanger your prospects of success by poor planning and mis information. Make contact with a reliable business financing consultant that has credibility, experience and background in this region of Canadian business financing. With the right planning and assistance you’ll be on the way to offer the Canadian imagine business possession with the franchise model.