An initial sum of money is required to start a franchise business. Find out more about the available franchise finance options in this article.
“Our flexible franchise finance options are designed to support both franchisees and franchisors with their business funding. “
Technically, no. If you’ve got the capital available to open a franchise, then a loan might be superfluous to your needs, but seeing as initial investments can range anywhere from £10,000 to £500,000 (or more), it’s likely that a loan of some kind will be required in order to get started.
What are the costs of setting up a franchise?
Much of this loan will be used to cover your initial setup costs. Depending on the franchisor, your expenditure will vary:
How do I fund my franchise?
Once you’re ready to take out your loan, there’s a few things that you should establish in advance. Many lenders will want to see proof of your ability to run your new business. Any investment is a risk, and you need to prove that you’re capable of paying your loan back. If you’re ever unsure of how to proceed, we recommend seeking assistance from franchise finance experts.
Create a business plan
Most franchisors will provide a baseline business plan for you to follow, expediting this process somewhat, but you’ll still need to establish a roadmap of where your business is currently, where you expect it to be over the next few years and how you plan on achieving this.
Lenders will want to know exactly how you intend to spend their money, and how you expect to pay it back. Your franchisor should provide you with key statistics, such as previous successful marketing plans, their main demographics, operational procedures, initial & ongoing costs, etc., meaning that you should have everything you need to put together a strong business plan.
Remember, though, that this is your business at the end of the day. It’s important that you put your own ideas into the plan, both to show that you’re capable, and to motivate you to follow it.
Check your credit history
A good credit history is essential in order to prove that you’re a safe investment. If you’ve got a poor history, lenders might assume that it’s too risky to lend you money. Making changes to your spending can help to improve your credit rating.
What financing options are available to franchisees?
There’s a wide variety of finance options for franchisees to choose from. This can depend on the franchisor. Many of them have established links with lenders already, but some will expect you to source your own funding.
One of the most important loans you can take as a franchisee, your start-up loan acts as the catalyst that propels your business, helping you to achieve your dreams. Many lenders are more comfortable lending money to a franchisee; an established franchise can demonstrate that its business model is functional, meaning that your business has a greater chance of success.
An excellent way to purchase, lease or refinance important equipment, asset finance is used by franchisees across the world to gain immediate access to the assets that are crucial to success. Asset finance plans are flexible, meaning that there’s an option available that suits your business goals.
If your franchise business leaves you waiting for payments from customers or clients, you might want to immediately release cash through invoice financing. This type of finance provides businesses the flexibility to make meaningful decisions without being bound by late payments.
While it’s best to not rely on an overdraft, they can provide a flexible method to borrow funds when you need it most. Overdrafts can prove costly, and often come with particularly high interest rates, so most franchisees see this as a short-term option to use if required.
Fund your franchise business with Shire Business Group
At Shire Business Group, we believe that everyone deserves the opportunity to fund their dreams. Our flexible franchise finance options are designed to support both franchisees and franchisors with their business funding.
To find out more about how we can help you build your dream business, get in touch with us today. Every year, we help tens of thousands of start-ups and SMEs across the UK to access the funding they require.
Finance for business use customers only. All finance is subject to credit status, approval, terms and conditions.