Top Tips: Financing a franchise

Anyone can buy a franchise.

The myth that you have to be cash rich to buy a franchise business is just that. A myth.

Entrepreneurs from all walks of life can buy a franchise through inheritance, redundancy, savings and, of course, finance.

Getting your ‘house’ in order

Obtaining finance is easier if you have a good credit history and have your business plan ready.

Your credit history is something that you nurture over time. It’s an opportunity to show the banks and lenders you are creditworthy.

I.e. you will pay them back what you owe them.

A good business plan is a detailed one.

It should include what the money borrowed from the bank will be used for and how you will pay it back.

Fortunately, lenders like franchise models because they tend to be proven.

As such, they are less of a risk to borrow against.

How much do you need?

It’s a good idea to consider the amount you’ll need to borrow.

Much is associated with franchise costs that aren’t included in the ‘start-up package’.

These typically include office equipment, vehicles, premises, registrations and insurance.

So, it’s vital to factor in these costs so that you ask for enough finance to cover all aspects of the business but to leave some ‘afloat’ for unexpected costs and cash flow.

What to ask your lender

Ask your lender about their credit terms, such as amount, duration, fees, rates, covenants and any payment holidays you might be eligible for.

Sources of funding

Most major banks, including Lloyds, Barclays, HSBC, and NatWest, to name just a few, support the financing of franchise businesses.

Some specialist lenders will also lend to those with a good credit history and a strong business plan.

Finance can open doors for individuals looking at franchise opportunities who don’t have the complete investment.

Speak to your high-street bank or a franchise finance lender for further information.