Site Search

Assistance with Finanace

Siskinds has worked with dozens of start-up franchise and manufacturing systems over the years.

In almost every case, the start-ups we have dealt with have required some kind of financing. This financing is usually employed to acquire assets and pay for various start-up costs.

In the case of existing systems, the cash may be used to expand existing operations, take on a new customer or product line, consolidate existing debt, or acquire land or equipment.

By accessing a variety of service providers with whom we have worked in the past, we may be able to assist start-up or existing systems raise the capital needed for expansion or consolidation.

AVAILABLE OPTIONS

The range of financing options available is as diverse as the systems we've dealt with. They include:

• capitalizing the franchisor corporation with appropriate share capital from incorporators.

This itself can include an incredibly varied array of options. It seems no two people want the same deal. Some options include:

• • simple sale of a percentage of common shares of the franchisor corporation.
  • sale of common shares (voting or non-voting), with a portion of special shares receiving a fixed. (cumulative or non-cumulative) preferred dividend
  • sale of common shares that are retractable after a period of time by the franchisor corporation, or redeemable at the investor's option.

• syndicated equity.

This is a variant on “share capital from incorporators”, except that the investment is made by individuals or institutions outside of the franchisor corporation.

• institutional investment.

Institutional money may be available for investment in start-up or established franchise systems. The &bricks and mortar” approach to lending is not typically favourable to franchisors, who offer royalty streams and sometimes inventory as collateral. Non-conventional lenders may be found for these kinds of systems, depending on the history, concept and collateral of the franchisor. Some options include:

• • asset-based lending, secured by the franchisor's physical assets for a fixed term at a fixed rate of interest. This would include assets such as equipment, or, of course, any real estate.
  • subordinated debt, which is invested as equity (which assists the franchisor's balance sheet, making conventional lending more available), but bears a notional rate of interest and is generally redeemable at a fixed future date.
  • straight-up lending, based on a fixed or variable interest rate, and due at a fixed future date. One or more facilities may be structured depending on need and collateral.

• initial public offering.

Larger entities may seek the benefits of liquidity, market capital access and employee incentivization and other benefits of a public offering. Smaller offerings are traditionally made in the small cap markets such as the NASDAQ, OTC or TSX Venture.

• reorganization and emergence from bankruptcy.

Sometimes a business reaches the end of its rope. Debt is too high to ever reasonably contend with. No additional credit is available. Despite these facts, the underlying business is still sound and management is in place. In fact, insolvency is sometimes the result of over-rapid growth. Some options include:

• • a friendly daylight receivership, where the assets of the business are re-purchased from the existing security holders by persons close to the current owners.
  • a more formal court proceeding under Federal insolvency laws.

HOW DOES IT HAPPEN

Some of our clients go off happily and attend to their own financing. Most arrange financing, and have us complete the securitization of the facility, once negotiated. Still others ask us for assistance with getting their financial affairs in order, arranging financing, then securitizing that facility.

Moving Forward. We look forward to working together with you to start, expand or re-structure your system, or to solve whatever problem or seize whatever opportunity you're dealing with, anywhere. Contact Peter Dillon at 800-816-9596 (or 519-672-2121 outside of North America) or electronically at peter.dillon@siskinds.com.