It’s not just about having one good relationship with a bank; it’s about ensuring that all your lender relationships work in your favour and support your businesses and your franchisees long-term goals.
Let’s explore why independent financial brokers can be a valuable asset in assisting you in this goal.
Why choose a broker?
While having a solid relationship with a bank is crucial, relying solely on one institution can be incredibly risky as well as a little short-sighted. Policies change, lending limits are reached, some banks may not be able to work with some clients, support can be amended or even withdrawn, and perhaps more importantly are there better offers for your Franchisees elsewhere? How will you know when a new entrant emerges with better terms?
Brokers can help you as they stay informed and monitor the competition across multiple lenders, ensuring you’re never ‘In the Army Now’ with just one financial partner.
Don’t get too comfortable
Banks have different offers, products, and service levels, and these can vary depending on client circumstances or business set up structure. How do you know which bank will provide the best deal for your franchisees and not just provide what they have to offer?
Are you too close to the process? By “guiding” your franchisees down just one, easy and comfortable route, are they missing out and are you risking your Brand reputation if they end up with a less attractive solution…or worse still a product that’s wrong for them?
A broker can evaluate multiple banks to find the right service, right price, and right approach. This is particularly important when considering each individual franchisee’s objectives, accounting needs and corporate set up which, let’s face it, is not the banks job anyway! So why not ensure your franchisees are getting the best possible financial and professional support, taking account of all their requirements.
Beyond banks: Exploring funding options
Banks aren’t the only source of funding for new franchisees but are usually, rightly, the first options to consider and all good independent brokers will consider their facilities as part of the funding structure. However, are you confident that your one bank contact will suggest your franchisee makes an alternative funding arrangement that would suit them better, when that might mean losing the bank the business? What if pension funding or raising funds through property works better for your franchisee? Or simply that the terms are better elsewhere for the same products? It’s vital we have competition in the market and that we stimulate it.
Alternative financing options, such as asset finance, or raising funds on properties can provide the necessary solutions with different positives and considerations to those of traditional bank loans. A knowledgeable broker can guide your franchisee through these options, offering a broader perspective on financing.
Brokers and motivation: Trust and transparency
However, when choosing a broker, it’s essential to understand their motivation. Are they driven by commissions from lenders, or do they prioritise your franchisees’ best interests? Do they fully understand directors loan accounts and commercial interest options? Are they qualified and regulated to provide that advice if they do? Transparency about fees and commissions is vital. Ensure your broker isn’t putting personal financial gain ahead of your franchisees needs. Shop around and get a feel for who has your franchisees best interests at heart and is not just churning out the same old ‘one size fits all’ formulas….
Regulatory considerations
It’s important to note that brokers are not regulated by the FCA (Financial Conduct Authority) for Business Planning and unregulated Funding. This lack of oversight means you must be diligent in selecting a broker who operates ethically and transparently. You need to be confident the broker, or brokers working with your franchisees, understand your objectives and that your franchisees needs are foremost.
Creating a Road Map for responsible franchising with business planning and funding.
1. Diversify banking relationships: Establish relationships with at least two banks, ideally three. This ensures you have options and leverage in negotiations. Work with your selected brokers to assist in this.
2. Services and business plan checking: Regularly review the service and offers from your banks and brokers. Ensure your business plans and funding provisions are solid and up-to-date.
3. Maintain independence: Keep your business planning and funding processes independent from your own structure and from broker’s financial interests. This ensures unbiased advice and support for franchisees.
4. Prioritise franchisees’ interests: Always put the needs and interests of your franchisees first. Don’t just keep one relationship going because it feels easy and comfortable. Your franchisees financial success is your success.
Conclusion
In the dynamic world of franchising, challenging the status quo and exploring all financial options is key to long-term success. By working with independent and professional brokers and advisors such as d&t, diversifying your banking relationships, and prioritising transparency and franchisee interests, you can lay more concrete foundations, helping to ensure the best financial health for your franchisee network.
Remember, don’t be afraid to challenge the status quo and soon you’ll be “Rockin’ All Over the World” with smarter financial strategies.
