Get this: banks and top-tier lenders love working with a franchise business. That’s why getting finance to get your franchise business off the ground is far easier than you think.
Best of all, there’s a myriad of franchise financing options for you out there!
Lenders in Australia.
Have a list of approved Franchises they will consider lending to.
Draw Up a Compelling Business Plan
Even if you are going down the road of a franchise chain, you should be able to tell the lender what makes you stand out in a sea of competition. That’s where you will need a well thought out business plan, detailing your franchise strategy. The bottom line is to showcase that you know what you are doing - that lender’s money is going to be in safe hands. If you cannot do that, your chances of scoring franchise financing are minimal to none.
What’s Your Worth?
Banks and alternative lenders want to know your worth so they can gauge your ability to repay the loan. You can use a balance sheet to determine your net worth and a Cash Flow projection to support the repayments, most Franchises on the approved list already have business plans and models to assist you. Two key aspects to your net worth are assets (savings, real estate, vehicles, investments, and other valuable belongings) and liabilities (car loans, mortgages, significant debt, and other current bills). The difference between the two is your net worth.
How Much Money do You Need for Your Franchise?
Before delving into what, where, and how to get the loans or finance for your franchise business, you need to ask yourself how much money do you need? Ask the franchisor for the full cost breakdown without forgetting the working capital, day-to-day expenses, and so forth. This way, you can come up with a detailed budget for your franchise business.
Significant costs associated with starting a franchise business include:
Franchise Fee
Most franchises charge an upfront fee which you can pay in instalments or a lump sum.
Advertising and Royalty Fee
You will receive a franchise disclosure detailing recurrent marketing and royalty fees you need to pay to the franchisor.
Franchise Loans
Franchise loans, in principle, are secured against the franchise business value, whether an outlet, store or restaurant. As such, the lender determines the market value of the franchise.
Franchisor Loans
Most franchisors have programs in the place to help finance new franchises. They may often waiver some associated charges like royalty, franchise, and advertising fees. Others partner with lenders to help franchisees secure loans.
Other Sources of Franchise Financing
You can also use your savings, borrow money from family or friends, apply for a personal loan or credit card, take advantage of the equity in your home, and so forth to secure finance for your franchise business.
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