Obtaining some franchise finance is often the biggest hurdle for anyone seeking to start a franchise in the UK. Starting any business can have risks, and as we know risks can be costly. It is therefore vital that you invest a lot of time and effort into researching those franchises that you are interested in. You need to be confident that it is an ethical franchise as well as the right franchise for you. Remember, there is not such thing as too much research!
Once you are 100% that you have found the franchise for you, then it is time to look at your finances. We have a considerable period of due diligence and the first step in planning your franchise finance is to establish how much money you can afford to invest and whether it is enough to purchase and run “your” franchise.
Banks like franchising, due to the higher success rates! They have learnt that it can be safer to lend to franchisees of well-structured ethical franchise systems, than to those starting up their own business from scratch.
Hopefully this section will give you some guidelines to work to in order to be able to approach a bank for franchise finance in a confident way, with an awareness of the type of questions likely to be asked. If you approach the BFA (British Franchise Association), they have a small list of franchise friendly banks, I suggest you look to speaking to them first, they will give you a criteria that is considered acceptable and an application process to follow.
Here are a couple of sites I found some useful information that are available on the net:
Before you approach the Banks you will need a well thought out and structured business plan, to present to them, your chosen Franchisor should be able to offer you some assistance and guidance in creating this, it is also good practice to back up your application with a written business plan to go alongside the financial plan too, to show that you have thoroughly worked through your goals and ideas.
If you only need a smaller amount of money to start your venture, then you may be able to source funding in many other ways, just a small personal loan, family or friends or even a re-mortgage on your property if you have sufficient equity.
Franchise funding generally offers between 505 and 75% funding of your total amount required to set you up and get you to a stage where you will be cash flow positive.
Mark Rozier, Franchisee Development Manager for Concentric Lettings, has a wealth of experience in running businesses, starting out his career working in the family business of transport and then branching out on his own, following his passion for coffee by running a coffee shop, experienced in all aspects of setting up and running a business as well as the front end sales of any enterprise, Mark uses to his advantage all that experience in working with the Franchisees who have joined Concentric as their Franchisee Development Manager and now shares his valuable experience with regular Blogs, articles and social media