Of all the financial products on the market, a government-backed loan is one of the most desirable options for aspiring franchisees. These are small business loans provided by conventional lenders, with a significant portion of the amount guaranteed by the federal government. According to the RBC, this is a common type of funding for first-time franchisees.
Canada Small Business Financing Loans (CSBFL).
In Canada, this type of loan is available through a government-sponsored program called Canada Small Business Financing Loans (CSBFL). Small businesses can borrow up to $1,000,000 with a full 85% of that amount guaranteed by the federal government. To be considered a small enough business to qualify, your entire operation’s annual gross revenue needs to be less than $10 million in the year you apply. Please note that these loans do come with a few restrictions, however. Because of the considerably lower risk involved, another advantage of a CSBFL is that banks and credit unions are apt to lend you more money, with lower interest rates and better repayment terms than they’d likely otherwise approve. If you have the credit score and track record required to secure one, a loan sponsored through the federal government’s Canada Small Business Financing Program may very well be your best financing option.
Business Development Bank of Canada (BDC)
Another excellent source of financing is the Business Development Bank of Canada (BDC), a Crown corporation that operates at arm’s length from the federal government. The BDC focuses on small and medium-sized businesses and is mandated to “create and develop strong Canadian businesses through financing, advisory services and capital.” The BDC offers a wide variety of loans, grants and other financing options to both seasoned and ‘new’ entrepreneurs (with some business/financial history), all featuring very favourable terms and limited personal risk.
Targeted at Specific Demographic Groups
Some other programs are also targeted at specific demographic groups, such as military veterans, indigenous Canadians (ABED, NACCA, AFI, etc.), recent immigrants (IIVC, etc.), young adults (Futurepreneur), rural areas (Community Futures), minorities (BEP, etc.) and women (WIT, SheEO, etc.), among others.