Gaining finance for a franchise
For any new business there are several options for acquiring finance, however, the preferred option for larger levels of finance tends to be bank loans - this is no different for franchising. Before thinking about approaching a bank, you need to build a comprehensive business plan to allow the bank to judge the viability of the franchise opportunity.
Many well established franchises may be able to help considerably with this, providing advice on many aspects of the franchise opportunity and possibly providing a template to get started. You need to be able to realistically demonstrate the potential market, which you believe to be there, and project the finance that you aim to generate.
Once you are in a position to approach a bank you need to make sure that you approach the right part of the bank. Some high street banks are accredited as experts in franchising and have a dedicated franchise team focused on ensuring that you are given the right advice and direction when raising the finance you need.
It is important to know from the start how much you need and not to try to save costs by under borrowing – it will only mean you need to go back to the bank when you run out of funds. You also need to include the money you need to operate before making a profit (working capital), so that you can actually live whilst getting the business started.
Most banks will only lend up to a maximum percentage of the value, so you will need to consider where the rest of the funding will come from. Once at this stage the bank will be able to guide you on your next steps, taking into account your repayment schedule, timescales and business services.
The government recognises the need for and benefit of new business, so there are usually schemes to help a new business start-up. These are usually available to support those that have a strong case to start a business, but may not have the capital available to place against a loan. This is a worthwhile subject to raise with the banks.