Purchasing a Franchise can be a great way to realise the dream of owning and running your own business. When you buy a Franchise you get to own your own business but have the added support of a known brand and proven business model and operating system, making your chances of success greater.
However, the capital outlay to purchase some Franchises means that it’s common to need to access finance to buy a franchise.
For many accessing finance to buy a franchise business can be a major obstacle, getting access to business finance for a new start up can be very difficult.
As a solution many Franchisors have arranged “approval” for franchise funding from various lenders. The lenders are already familiar with the Franchisor’s business model, training for franchisees and support and thus understand the risks, challenges and opportunities associated with that particular business. How Franchise funding works is that the lender agrees to provide funding under specific terms to new franchisees buying into a particular franchise, given their familiarity and experience with the business. This gives new Franchisee’s another option to purchase their new Franchise rather than tapping into their own savings or trying to borrow from else where.
Benefits of Franchise Funding
- Loans are often processed quicker as the lender already has an understanding of the business model
- The Loan product itself is often tailored to the individual franchise system (e.g payment terms etc)
- Increases leverage against the value of the business / Franchise, providing the ability for franchisees of preferred systems to borrow against the value of their business (including all franchise fees, training costs, stock and business assets) up to a percentage of the purchase price
- Less reliance on the franchisee’s personal assets when assessing borrowing requirements for finance
If you are a looking to buy a franchise or franchising your business and seeking assistance with providing a franchise finance option to potential franchisees contact us.