Business folks often refer to the term ‘key to success’ as part of their business plans. Certainly the key to success when you buy a franchise is to finance it on time, and properly; we tell clients you don’t get a lot of chances to make mistakes when you are working with franchise finance lenders!
The concept of financing your franchise is a broad one… it might be one single loan or a couple different finance strategies to get you to the goal line, which is of course acquiring and owning your own business under a franchise umbrella… in effect the Canadian dream.
Try and try again generally doesn’t work in franchise finance – you more or less, in our opinion, get one chance to do it right. That therefore involves getting all your ‘ ducks’ lined up properly and working with an experienced Canadian business financing franchise advisor, or if you prefer, yourself and the lender directly.
As we said, making mistakes in business finance is not where you want to be – so plan, do it right, and do it once. Let’s examine some of those underpinning you need to be successful and avoid those errors.
In general some of those cornerstones are decent personal credit history (more about that in a minute – as we can hear our clients already ” what’s decent?!), a down payment that makes sense. and a financial plan that demonstrates your ambition to be successful.
This latter point is usually covered off in a business plan. We can’t ever imagine buying a business without a plan, and humbly submit that if you don’t have a plan you are primed to fail – and that’s not a good thing when you have your own funds at stake.
Can you buy a franchise in Canada, and finance it without a good personal credit history. We tell clients the sad truth is that it is difficult, if not impossible, to do that successfully. That’s because franchise finance lenders view your business as both a start up and a small business, and they relate those two terms directly to how you manage your own personal finances as the owner. To put is very simply, the lender is saying ‘ if this man or woman isn’t paying Visa then why should I think they are going to pay us….’ In Canada the credit bureau system is based on a score to 800 and you need a certain specific number to qualify for franchise financing. Speak to a trusted, credible and experienced business financing advisor as to how you can manage and work through that process.
You probably have spent a large part of your life dreaming about crafting a great business plan, opening balance sheets, 3 years of projected cash flows… loan amortizations, etc. Uh… we’re being a bit sarcastic of course!! But the reality is you need a solid business plan to demonstrate how you will be successful. It’s a great document for benchmarking down the road even how you are doing against your plan.
In Canada the majority of franchises are financed and subsidized so to speak by a special federal program called the BIL program. Don’t make a mistake in not understanding what the qualifications are, and work with an expert if you don’t feel you are comfortable in navigating the finance maze.
So, is financing the key to Success when you buy a franchise in Canada. We’ll let you be the judge… but if you are on the side of our opinions plan, and work with an expert, do it right, and avoid mistakes that will jeopardize closing the transaction,.