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Short answer: Canadian franchisees usually get the best results by leasing revenue-generating equipment and using separate term financing for fit-outs and franchise costs. In practice, that means a mix of equipment leases, franchise or term loans (often under a government-backed program), landlord contributions, and a working capital facility — all sized to your brand’s ramp-up curve and your own cash contribution.
Franchises don’t fail because the logo is wrong. They fail because the capital stack is wrong.
A typical Canadian franchisee has to cover:
Meanwhile, franchising is huge in Canada — more than 66,000 franchise locations across about 1,100 brands, contributing roughly $120 billion to the economy. (CANADIAN FRANCHISE ASSOCIATION) A new franchise opens roughly every few hours. (Elite Franchise Canada)
Most of those units rely on external financing to open or remodel. The trick is not “Can I get money?” but “Which tools should I use for which cost?”
A solid approach:
Let’s walk through the main options and how they work together.
Key point: Long-life equipment and leasehold improvements should be financed over years; pre-opening costs and working capital should be funded with shorter-term, more flexible tools.
From a credit analyst’s chair, the most common mistake I see is:
Trying to make a single loan pay for everything — equipment, fit-out, fees, cash buffer — and then discovering the payments are too heavy for the first year’s sales.
Instead, think in layers:
Each layer has a financing tool that fits it best. Using the wrong tool (e.g., putting equipment on a credit card, or funding working capital with a 10-year term loan) is how otherwise-solid franchisees get stressed.
Mehmi’s product set is built around this separation — equipment financing for the hard assets, and business loans for softer, time-limited needs.
Key point: For most franchises, the default for equipment should be leasing, not paying cash or stretching working-capital products.
BDC describes equipment financing as a way to acquire long-term assets that boost productivity without draining cash, whether you’re buying or leasing. (bdc.ca) Leasing goes one step further by letting the funder own the asset while you pay to use it, often with a buyout option at the end. (Services Financiers Affiliés)
For franchisees, leasing works especially well for:
With a Mehmi equipment lease, you can typically:
As long as the asset has a serial number and resale value, there’s a good chance it fits Mehmi’s eligible equipment list.
If you’re:
…an equipment line of credit often beats doing one-off deals:
This works particularly well when paired with Mehmi’s vendor program, so the franchisor’s preferred suppliers are paid quickly and consistently.
If you already operate one or more units and own equipment outright, you may be able to tap that equity for growth:
These tools are helpful when you’re mandated to remodel by your franchisor or want to refresh older locations without writing a giant cheque.
Key point: Fit-outs are expensive, and you usually only get one chance to do them right. Use term financing that’s built for leasehold improvements, ideally with some government support.
Leasehold improvements (fit-outs) cover everything from new walls and doors to plumbing, HVAC, electrical, flooring, and signage. BDC notes that renovating leased space is costly and easy to underestimate — and warns that under-financing can put dangerous pressure on working capital. (bdc.ca)
Common financing tools in Canada include:
Banks and specialist lenders offer term loans tailored to franchises, like National Bank’s programs for franchise equipment and fit-outs. (National Bank)
Mehmi’s franchise loan plays the same role with a more flexible mandate:
Government-backed loans under the CSBFP can be used to finance:
Recent guidelines allow up to $1,000,000 in total loans, with up to $350,000 earmarked for equipment and leasehold improvements combined. (CCIB)
Banks still underwrite these loans, but the government shares some of the risk, which can help newer franchisees get approved. A Mehmi franchise loan can sit beside a CSBFP term facility or complement it for needs that fall outside program rules.
Don’t forget the “free money” on the table:
Your Mehmi advisor will usually ask about TI right away when sizing a franchise loan; it’s a key part of protecting your working capital loan from being eaten by construction overruns.
Key point: Franchisees often underestimate how much they’ll need after opening. Protect yourself with the right mix of working capital tools.
Franchise financing content often focuses on the “big ticket” items — equipment and build-out. But the brand can be perfect and the store beautiful, and you can still get into trouble if you run out of cash in months 3–9.
Typical soft costs include:
Here’s where Mehmi’s business-loan tools come in:
For larger projects or multi-unit operators, a secured loan backed by business assets, or a smaller unsecured loan for specific soft costs, can round out the stack.
Franchise Direct Canada’s overview of franchise funding options emphasizes this same mix: equipment/asset-backed facilities for hard assets, and term or operating loans for startup costs and working capital. (Canada)
Merchant cash advances (MCAs) show up frequently in food, retail, and personal services franchises. They’re fast and easy — and often very expensive. Industry comparisons put many MCAs at effective rates far above typical bank or lease financing, especially once you factor in fees and short repayment periods. (Canada)
My opinion:
If MCAs are already in your mix, Mehmi can often use refinancing or sales leaseback and a franchise loan to clean them up.
Key point: Take advantage of franchisor and vendor solutions — but make sure they fit your overall structure, not just their sales targets.
Many franchise systems have preferred financing channels:
These can be valuable, especially with well-known banners. But they’re not always the most flexible. A third-party partner like Mehmi can:
Either way, the goal is the same: one coherent funding plan, not four separate agreements that don’t “talk” to each other.
Key point: Don’t start with “How big a loan can I get?” Start with “What does the project really cost, and how fast will it earn?”
Here’s a simple, practical process we use with franchise clients.
Include:
BDC warns that businesses often underestimate these non-obvious costs when they move into or renovate space, which can strain working capital. (bdc.ca)
Most franchisors and lenders expect some equity from you — often 20–40% of total project costs for a new unit. Canadian Franchise Association materials and lender guides consistently emphasize that under-capitalized franchisees pose higher risk. (CANADIAN FRANCHISE ASSOCIATION)
More equity usually means:
A typical Mehmi structure might look like:
Use Mehmi’s calculator to test payment scenarios — if the plan only works in a “perfect month”, it’s too tight.
Once you have rough numbers:
That way, your real estate negotiation and your financing plan move in step — preventing the classic situation where you have a beautiful LOI and no realistic way to pay for the build-out.
Using one partner who can cover both equipment financing and business loans reduces the risk of double-pledged collateral and conflicting covenants.
When you’re ready, Mehmi’s Contact Us page is the simplest starting point — you can outline your brand, location, and timeline and let a Canadian credit specialist suggest next steps.
Setting (details adjusted for privacy):
Challenge
The operator’s main bank was willing to extend some term debt, but:
On paper the business was healthy, but capital was tight and timelines aggressive.
Solution with Mehmi
Working with a Mehmi advisor, they built a project-wide capital stack:
Outcome
Over the next 30 months:
From a credit perspective, nothing “magical” happened — but by separating equipment, fit-out, and working capital into the right funding tools, the franchisee turned an overwhelming mandate into a manageable investment.
In theory, yes — between equipment leases, franchise loans, and government-backed term loans like the CSBFP, it’s possible to cover the full project cost with debt. (CCIB)
In practice, most franchisors and lenders expect some owner equity (often 20–40%) to keep the capital structure healthy and give you room for surprises.
The CSBFP lets banks make term loans where the government shares some of the risk. It can fund up to $1,000,000, with a portion (commonly up to $350,000) available for equipment and leasehold improvements, including franchise build-outs. (CCIB)
Mehmi can structure a franchise loan to complement a bank CSBFP facility, or provide alternatives if you’re not a fit for that program.
For most franchisees, leasing is the better default:
Buying in cash can make sense once you’re more established, but at startup or remodel time, Mehmi’s equipment financing is usually a more efficient way to get the gear you need. (bdc.ca)
Many do. Large brands often have preferred bank programs or in-house/vendor financing for equipment packages and sometimes leasehold improvements. (CIBC)
Those programs can be useful, but they’re not your only option. A partner like Mehmi can either:
Often yes. Asset-backed tools like equipment leases, asset based lending, and refinancing or sales leaseback lean more on the value of the equipment and the strength of the franchise brand than on a flawless personal credit score.
You may not get “A-tier” pricing, but Mehmi’s role is to design a structure that is competitive for your profile and sustainable for your cash flow, rather than push you into short-term, high-cost products.
Yes. Established franchisees often use refinancing to fund refreshes or new locations. For example:
Before you do anything, run the numbers with the calculator and talk through your plan with a Mehmi advisor so the new structure genuinely improves your position.
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