How to Finance Canadian Franchises

A Canadian franchise will require funding.

Buying a franchise in Canada can be a good way to start your own business. If you have the liquid assets to fund this purchase, you are in luck. If not, you will need to find financing. Fortunately, there are a variety of financing options available to you for a Canadian franchise. If you follow a set of simple steps, then it will make the process easier and increase your likelihood of success.

Things You'll Need

• Computer

Instructions

1. Search for government funding. The Canadian federal and provincial governments offer a variety of grants for new business owners. Visit canadabusiness.ca and search for business grants. Some government programs consist of grants or subsidies, while others consist of loans that will need to be repaid, although a portion of the debt may be forgivable.

2. Consult the franchiser for information about funding programs that may be available. Some franchisers are able to provide funding programs that will help you to borrow money to start your franchise.

3. Apply for a bank loan. It is often difficult to secure a bank loan for a new business. This is because new businesses do not have a track record. The advantage of a franchise is that it does have an established record that a financial institution can take into account when granting a loan. Banks such as TD Canada Trust even offer specialized services for franchises and actively encourage them to apply for business loans.

4. Invest your own money. Even if you can't afford to purchase the franchise entirely with your own funds, you can use your own money to attract other investors. Investing your own money shows that you believe in the franchise, which is important if you expect others to invest.

5. Seek private investments. An efficient way of raising capital for a franchise is to get others to invest with you. You should look to friends and family members that might potentially be interested in becoming co-owners of the franchise with you. Be sure to specify if you are looking for a partnership or that you are offering only a minority stake and make it clear whether you want a managing co-owner or a silent partner.

Tips & Warnings

• Discuss franchising fees with the franchiser. You may be able to negotiate lower franchise fees while you are beginning your franchise. This will free up money to invest in the business.

• Be sure to understand the legal implications of any loans that you undertake. Depending on the legal form of your business, you may be responsible for repaying the loans yourself if the business fails.

References

• Government of Canada: Government grants and financing
• TD Canada Trust: Franchise Funding

Resources

• Canada Business: Service for Entrepreneurs