expert advice: Dan Toms | Sales Director | CFI Finance
Tips for
accessing Finance For the overwhelming majority of franchisees, access to funding forms a critical component of their initial franchise purchase. The turnkey cost (total setup cost) of a franchise business typically exceeds the savings that a prospective franchisee has to contribute. Therefore, funding is required to fill that gap. But where do you start? What lender/s do you approach? And what information will they require? Accessing funding does not have to be a complicated process, below are some simple steps you can follow to make it as painless as possible.
When to seek finance A mistake that some new franchisees make is that they apply for finance far too late in the process. If your franchise purchase is reliant on funding approval then this is something that should be secured earlier rather than later. As a general rule, finance approval should be obtained before any long-term commitments are signed (like property leases or the non-refundable component of the franchise fee).
Where to get Funding Choosing the right finance partner is important as there are only a select number of lenders that have the appetite to fund “startup” franchise businesses. Some of the major banks will have appetite for franchise lending (though they may require you move all your bank services to them), there are also independent lenders that specialise in funding the franchise sector. Those lenders that specialise in funding franchise networks typically represent the best chance of a finance approval as they are assessing the application not just on the strength of the individual applicant but also on their brand knowledge and trading history with that particular franchise brand. A recent report by Medici also found that the approval rate with alternate lenders was twice that of the banks. 16 business franchise MAGAZINE
