Whether you're planning to enter the care home industry, you're seeking to run your own restaurant or anything in between, investing in a franchise provides a great way to enjoy the benefits of your own business whilst also working within an established model.
Applying for finance is often an essential part of this process. In this guide, we'll share 10 top tips on how to go about securing the cash you will need to get started:
1. Consider the best move
Before committing yourself to a finance plan, it's worth going through the options to check that applying for finance is actually the right move for you.
Some people, for example, may not actually need to apply for a business loan. If your living expenses are already covered, for example, you may find that you are able to cover early operating costs from another source, such as family.
2. Work out potential profits
Speaking to similar franchisees in your field and area will give you a good idea of what sort of returns you can expect.
From there, you can work out how much you need in total and use that figure to produce a business plan. Remember to err on the side of caution, however - don't get carried away!
3. Don't forget losses
And while nobody likes to think about their business
Before agreeing to a finance plan or any business loans, you should think carefully about whether or not you'll be able to deal with your obligations to the finance provider if times get tough.
4. Know your company inside out
You should also do your research on the franchise company as well and find out whether or not they're as profitable as they usually say they are.
While a franchise like McDonald's is unlikely to go under anytime soon, some less-established franchisors may be at risk.
Companies House can provide some information in this regard, but you may also want to enlist the services of a specialist firm to help you.
5. Ask your company for help
Before committing to start-up loans from elsewhere, it might be worth speaking to the franchise company to see if they can offer any help.
The amount of support on offer can vary greatly from one franchise company to another, but in some cases, you'll be able to get a loan from them. The structure and repayment terms of the loans can change from company to company, too, so be savvy.
6. Factor in equipment
A smart move for a
This is because
As equipment will more than likely be your lifeblood as a
7. Think about your home
When applying for finance to become a
If you own your own property, you may have to secure the loan against this - so speaking to your partner and family as well as your finance provider is essential.
8. Get your timings right
Before you secure finance from any source, you're going to have to know how long it will take to become profitable.
Loan providers will always need to know how long you estimate that it will take to pay them back, so this is crucial. Usually, this can be based on your forecasted profitability figure, and online research will help here too.
Whatever figure you come up with, you should assume it will take a bit longer and add a year or two on - just in case.
9. Do your research
One of the most crucial steps you'll need to take in order to make your franchise finance work is to find the most cost-effective deal.
With providers all jostling to be the one which provides you with start-up loans, you'll need to find the one that works for you. You need to be careful that you don't get sold an expensive deal with funding options you might not need, so due diligence is essential.
10. Ask for help
A problem shared is a problem halved, you'll be far less likely to make the wrong franchise finance decision if you get some other people to help you think it through.
Sometimes you might need specialist help, such as that of a lawyer. Mostly, however, it's wise to just chat about your options with a trusted associate or mentor before taking the plunge.
You can speak to us at Nationwide Corporate Finance if you have any questions about taking out business loans to buy a franchise.