4. FINDING FINANCE

A Finding finance for your franchise can feel like an enormous hurdle and it is goes without saying that this is one that you will have to cross before you get on your way to running your business.

It is a good idea to firstly go to your bank and let your advisor know what you are thinking about doing. Your bank may have a specialist at the branch, so it’s worth asking if this is the case. It would also be a good idea to find out what the likelihood of being able to maintain a relationship with this person is. Choosing a suitable franchise for you is not something to be rushed and if during the whole process you suddenly find that your advisor has been moved to another branch, which is common nowadays, what position will you then be left in? Will there be enough information with the advisors new counterpart for you to continue seamlessly with your arrangements? Will you be able to find finance with a new advisor who does not have a relationship with you?

At this early stage your advisor (particularly if they are specialised) will be able to give you advise that will save you time and trouble in the long run, such as what type of franchises to stay away from

Any franchisor worth his salt will have a pack which you can take to your bank and which will clearly demonstrate the company history in terms of how many successful franchisees they have had in the past, the length of time the franchise has been running, and what running costs and profits will be. The franchisor will help you to find finance, and often will have deals with loan companies on which they will collect commission but don’t be dragged in to any agreements until you have shopped around. Your franchisor should also help you with a business plan which your bank will request. Franchisors are accustomed to helping applicants to find finance.

You may have savings which will allow you to make a contribution towards to total amount of finance you need to find, and banks will typically allow between 50% and 75% depending mainly on the track record of the franchise, and your suitability to run the business successfully. They will want to know what qualifies you to run a business, what education you have, required skills and so on.

The bank will want you to demonstrate that you know how the business works, how profit can be made, and how much you need to make before you break even. You will also need to make a list of your personal expenditure, such as what you need to cover your mortgage, your utility bills travel expenses and general living costs for you and possibly for your family. In other words, how much you will need to take out of the business.

It helps if you can put up security, but bear in mind that no bank wants to cash in on security you are offering such as collateral in you family house.
They would rather see that you are able to operate a successful business and make a profit.

The Financial Services Authority have a web site for the public to make use of at http://www.moneymadeclear.fsa.gov.uk/