How Do You Finance The Franchise Cost Of Buying A Franchise
Options. It's better when you have them , and if the decision of choosing a franchise
wasn't enough for you , then going about getting the right franchise loan financing clearly adds a challenge to your new entrepreneurial role as a franchisee in Canada's every expanding franchise industry .In Canada your ability to finance part of the franchise via what we call your own ' owner equity ' investment is still a key requirement for total success. Businesses are financed in only two ways, equity, or debt. Your own investment is of course the equity, now let's look at what options are available to you to finance the franchise cost of your business. Naturally it should go without saying, (but we will say it!) that the financing of your new business can include a new turnkey scenario, or, alternatively, you have the option of purchasing an existing franchise from a franchisee.
While you have some choices in franchise financing us clearly advise clients this is a very specialized niche type of financing, and 3-4 solutions typically are the ones that are predominantly used over and over again by franchisees in Canada. Let's cover the basics of those off, which hopefully will allow you to be an ' informed financier ' of your project.
We don't see this happening too often in the Canadian landscape, but you do have the very simply option of working with your current bank to get a ' traditional' financing in place. Given the general conservative nature of banks the reason this type of financing is not used is that it requires more often than not 100%, if not more, external collateral which might involve pledging of your home, savings and investments, etc. Therefore, let's quickly move on from that one, which is rarely a favorite.
Although your bank might not wish to provide a traditional stand alone loan for the financing it is somewhat ironic they are chartered as the administrator of the most commonly used program in franchise finance, the BIL program which is supported by the government. This is by far the most popular program in Canada to finance franchises and when it works it works very well .Seek a trusted, credible, and experienced franchise financing advisor who will guide you through the mechanics of that program. With good mentorship from your advisor your financing can be approved in days - many clients unfortunately tell us they have struggled for months on their own wrestling with the mechanics and requirements of the program, which quite frankly are pretty basic.
Two other solid strategies to implement on your franchise are a leasing and equipment financing option, which is fast and efficient to achieve way to minimize bank or BIl borrowing, as well as a vendor take back from the franchisor or an existing franchisee if you are purchasing an already in business franchise .
Franchise finance options. You have them, investigate and use them to cobble together the perfect franchise finance package that suits your business purchase.
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