The ideal franchise relationship is all about partnership, with expertise close at hand, whilst having the independence and autonomy to run your own business. Franchising enables you to access a wealth of strategic stakeholders within the industry, such as key financial organisations, which may not be at reach to those looking to run independently.
Starting a business can be daunting, particularly in sectors that are heavily regulated. Therefore, understanding your financial situation is essential.
So, how are you going to fund this exciting opportunity of setting up a franchise, if you are a newly formed limited company with no trading track record?
Approach lenders who only work with quality proven franchise businesses and have completed extensive due diligence on who they work with and how they operate. It’s common for franchisors to have established relationships with lenders, which can allow new franchisees to access higher levels of unsecured lending, bespoke interest rates and greater loan to set up cost support.
The importance of dedicating time to understanding the detail within your business plan should not be underestimated. It is also key that you seek access to financial planning and P&L management support, particularly as over the past few years many independent businesses have been left to weather the storm alone.
Let’s look at a few essential steps for securing a loan to help fund your franchise.
Have those initial conversations
Set up meetings with key lenders in your industry, to kickstart a relationship and express your interest in obtaining funding.
Submit your financial information
Prepare and submit your financial information to your franchisor. Once they have reviewed and discussed this with you it will be submitted to the credit department.
Get a decision in principle
This confirms the bank can support your lending request. At this point, your interest rates, fees, and any lending conditions will be confirmed.
Complete the due diligence checks
This helps identify you and needs to be undertaken for all franchisees. If you are opening a business bank account with the lender this will be completed at the same time.
Lending & legal documents are sent to you
Once the due diligence is complete, your local relationship manager will ensure all lending and legal documents are sent out to you and solicitors (if applicable).
Completion
The lender will release the funds once all documentation is returned and satisfactory to the bank. They will typically check the lending and legal documents as well as ensure any conditions of the lending are satisfied.
So, in summary, work with your franchisor to understand the numbers and viability of your business opportunity. Use the data available within the franchise network to develop an extensive business plan which clearly demonstrates the financial sustainability of your proposition.
