How to Finance a Franchise in Canada

Most franchise lenders in Canada expect a down payment of 30% to 40% of the total project cost. If you are opening a franchise that costs $600,000 all in (leasehold improvements, equipment, franchise fee, working capital), you need $180,000 to $240,000 in liquid capital before approaching any lender.

That liquid capital must be unencumbered - lenders do not want to see it borrowed against a home equity line. It needs to be savings, investments, or capital from the sale of an asset.

The CSBFP is a federal government loan guarantee program that allows small businesses to borrow up to $500,000 (or up to $150,000 for equipment) with the government guaranteeing 85% of the loan. This dramatically reduces the risk for lenders and makes it possible to borrow amounts that would otherwise be difficult for a first-time business owner.

Eligible costs under CSBFP: leasehold improvements, equipment purchases, and certain intangible assets. Not eligible: franchise fees, working capital, inventory.

Most major Canadian banks and credit unions participate in CSBFP. The application process is similar to a standard business loan, but with more favourable terms.

BDC is a federal Crown corporation that exists specifically to support Canadian entrepreneurs. BDC has a dedicated franchise financing team and has funded thousands of franchise locations across the country.

BDC advantages: willing to take on higher-risk deals than commercial banks, patient capital with longer amortisation periods, and advisory services alongside the loan. BDC limitations: slightly higher interest rates than chartered banks, and a more involved approval process.

RBC, TD, BMO, Scotiabank, and CIBC all have franchise financing teams. These teams understand franchise business models specifically - they know Harvey's unit economics are different from a home services franchise - and they can move faster than a general business banker who has to research your industry from scratch.

When approaching a bank, ask specifically to speak with someone on their franchise lending team, not a general commercial banker.

A complete business plan with financial projections for years 1 through 5. Be conservative on revenue and realistic on costs.

Proof of franchise approval. Most lenders want to see that the franchisor has conditionally approved you before they commit to financing.

Personal financial statement. A full picture of your assets, liabilities, income, and credit history.

The franchise disclosure document and franchise agreement. Lenders will read these.

Evidence of operator experience. Your resume and any business ownership history.

Many new Canadians have strong savings and business experience but limited Canadian credit history. BDC and some credit unions are more flexible on this point than chartered banks. The CSBFP is also accessible to newcomers who have been in Canada for less than two years, as long as the business plan is strong.

Before approaching any lender, use Verifran's free FitScore to see how your financial profile compares to what franchisors and lenders expect. The financial dimension of your FitScore directly reflects the factors banks look at - liquid capital, net worth, debt management, and investment readiness.