Expert Advice

How to fund your franchise in Scotland

How to fund your franchise in Scotland

Franchising continues to gain momentum in the UK despite challenges presented by the Covid-19 pandemic and other economic conditions, with franchises across a broad range of sectors experiencing growth in the face of adversity.

Scotland is a growth area for many franchise brands and will become a real opportunity for franchisees to take on their own business. Commenting on franchising’s increasing popularity, Barclays’ Head of Franchising, Oliver Dallaway, says: “We’re experiencing increasing demand from people seeking a better work-life balance, who want their own business and the benefit of a proven business model with a trusted brand. We are also seeing increased interest from people looking for a new direction as a result of Covid-related challenges. Scotland is being targeted by many franchise brands as a growth area and will result in a lot of opportunities for individuals to buy into a franchise business”.

Barclays Franchising – supporting your future franchise purchase

There are many things to consider when purchasing a new franchise brand. Barclays Franchising has a dedicated team of Franchise Business Development Managers, as well as local relationship teams in Scotland specialising in franchise to support you.

Oliver says: “We have partnership agreements with household name franchisors, and also well-established franchises across a wide range of sectors and markets, including recruitment, cleaning, education, general convenience stores, specialist retail outlets like coffee shops and artisan bakeries, and many more. This ensures we understand the market, how the franchises operate and also the financial requirements needed to support the prospective franchisee.

Barclays can offer potential franchisees an unsecured loan of up to £250,000 where we have partnership agreement in place with the franchisor and we’ll also consider larger loans, with support from our Franchise Business Development Managers and regional franchise teams. We support new start-ups franchises, resales and also multi-territory and multi-brand franchisees.

Additionally, all our franchise customers can benefit from Barclaycard merchant services, credit cards, business banking facilities, plus ongoing support and sector insights to help them in their drive for growth.”

Key tips when applying for finance

Whilst you are going through your franchise journey, you should consider how you are going to finance your new franchise business. Below are some top tips.

  • How much will the Bank fund?

It is likely the franchise you are looking to purchase will hold a relationship with the franchising department of the Bank. This will usually mean you can access lending of up to 75% against total set up costs. For those new franchise businesses, this is more likely to be 50%. It is important to ask your franchisor what relationship they hold with the Bank’s franchising team.

  • How will you fund your deposit?

Your deposit will be subject to the support for the particular franchise brand you are purchasing. It is therefore important to consider how much money the total set up costs will be and calculate how much you would likely need to contribute. It will then be important to consider how you will raise this money. For instance, do you have personal savings, a pension or investments to use? Alternatively, do you have an opportunity to release funds through property or through family?

  •  How much of a salary will you need from the new franchise?

It is important to consider how much salary you plan to withdraw from the new franchise. You will currently have an income and it is important to consider if you will need the same level of income from the new franchise straight away. It is likely that a new site will take longer to grow, and may mean you have to consider if the business can support the level of drawings during the early stages of growth.

  • Business Planning and Financial Forecasts

Most franchisors will support you with the business planning and financial forecasts. You should have a details business plan and forecasts should include a cash flow and profit and loss forecast. The business plan will help explain how you will achieve your goals for the new franchise business and the forecasts will help you understand how the plan will help generate profitability and manage your cash flow. You should also consider how your personal salary withdrawal will impact the cash flow and this will also impact loan affordability. A great tip is the franchisor will help guide you on if the sales are realistic based on their experience, but you should take ownership for achieving these figures.

  • Get professional support

The franchise community is built on foundations of strong support. This will not only be with your franchisor but also your professionals. It is important to have a team around you who understand franchising and will act as your trusted advisors. This will include your Bank, accountant, solicitor and The Bfa. This will provide you the confidence in setting up your franchise business in the right way but have the ongoing support to rely on thereafter.

  • Have early engagement with the Bank’s Franchising Team

By having early conversations, it will allow you to have quality conversations with the Bank’s Franchising Team. They will help support you with your financial requirements, ensuring the funding package is suitable to your needs and will support you from setting up and throughout your franchise journey.

To find out more about how Barclays can help, please visit https://www.barclays.co.uk/business-banking/brokers/franchisees

Affiliate Member
Barclays Bank

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