Financing your franchise
Financing your franchise
Like any other business start-up, they need to have a solid business plan in place to obtain the necessary funding from a bank, although with franchises the bank will take the track record of the franchiser into account as well.
In general, major banks will lend up to 70 per cent of the start-up costs for an established franchise and 50 per cent for a newly established franchise, which is more than they would give to people starting an independent business.
This is because most lenders consider franchises to have a higher success rate, and thus a lower risk, than new businesses.
So, if you can answer the bank's questions with assurance and have the finances to back your answers up, you stand an excellent chance of running a business.
But any lender will also require forecasts of your cash flow situation for the first few years of running your new franchise and these estimations will need to be backed up by solid calculations and realistic expectations.
Here it is important to include an emergency plan if things do not go as plan, to show the lender that you have considered all eventualities and are prepared for taking on the franchise.
Lenders will also assess a potential franchisee's own personal financial situation and will require you to set out your personal expenses, such as household bills or a mortgage, in order to work out how much you can borrow.
Just like the franchisor, the lender is also likely to carry out a background check to assess the borrower's financial history, training, track record and suitability to run the particular franchise.
Once it has been established that the franchisee is a suitable candidate to grant a loan to, the lender will calculate exactly how much it can lend and here the amount that you can invest independently into the new business will impact significantly.
It is usual practice for lenders to expect the borrower to contribute between 30 and 40 per cent of the start-up cost with funds that have not been borrowed elsewhere.
The type of financing required also plays an important role and lenders may have different criteria for assessing those applying for overdrafts, loans or a combination of financial services.
Potential franchisees will also need to consider which type of financing would be the best option to cover initial start-up costs and if another type of credit would be best to pay for the day-to-day running of the business.
Security will be required before financial help will be given to a potential franchisee. This can be given in the form of equity on your home or guaranteed cash income that can be proven by the applicant.
However, if adequate security cannot be given, potential franchisees could consider applying for financing through the government's Small Firms Loan Guarantee Scheme.
This scheme offers loans to entrepreneurs whose lack of security is the only criterion stopping a traditional lender from granting them financing.
Financing your franchise - To learn more about this author, visit Diarmuid Kieran's Website.
Like this article? Share it with your friends
Potential franchisees need to make sure they have their finances in order before they can go ahead with a franchise purchase.
Like any other business start-up, they need to have a solid business plan in place to obtain the necessary funding from a bank, although with franchises the bank will take the track record of the franchiser into account as well.
In general, major banks will lend up to 70 per cent of the start-up costs for an established franchise and 50 per cent for a newly established franchise, which is more than they would give to people starting an independent business.
This is because most lenders consider franchises to have a higher success rate, and thus a lower risk, than new businesses.
So, if you can answer the bank's questions with assurance and have the finances to back your answers up, you stand an excellent chance of running a business.
But any lender will also require forecasts of your cash flow situation for the first few years of running your new franchise and these estimations will need to be backed up by solid calculations and realistic expectations.
Here it is important to include an emergency plan if things do not go as plan, to show the lender that you have considered all eventualities and are prepared for taking on the franchise.
Lenders will also assess a potential franchisee's own personal financial situation and will require you to set out your personal expenses, such as household bills or a mortgage, in order to work out how much you can borrow.
Just like the franchisor, the lender is also likely to carry out a background check to assess the borrower's financial history, training, track record and suitability to run the particular franchise.
Once it has been established that the franchisee is a suitable candidate to grant a loan to, the lender will calculate exactly how much it can lend and here the amount that you can invest independently into the new business will impact significantly.
It is usual practice for lenders to expect the borrower to contribute between 30 and 40 per cent of the start-up cost with funds that have not been borrowed elsewhere.
The type of financing required also plays an important role and lenders may have different criteria for assessing those applying for overdrafts, loans or a combination of financial services.
Potential franchisees will also need to consider which type of financing would be the best option to cover initial start-up costs and if another type of credit would be best to pay for the day-to-day running of the business.
Security will be required before financial help will be given to a potential franchisee. This can be given in the form of equity on your home or guaranteed cash income that can be proven by the applicant.
However, if adequate security cannot be given, potential franchisees could consider applying for financing through the government's Small Firms Loan Guarantee Scheme.
This scheme offers loans to entrepreneurs whose lack of security is the only criterion stopping a traditional lender from granting them financing.
Financing your franchise - To learn more about this author, visit Diarmuid Kieran's Website.
Like this article? Share it with your friends
 | |
 |
No article feedback found. |
| |
Leave Your Feedback |
 | |
| |||
John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
|||
Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
|||
John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
|||
Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
|  |
Subscribe to Diarmuid's articles
 | |
|
|  |
 | |
|
| |
 | |||||||
|
 | ||
 |
||
|
||
 |
||
|
| ||
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"
Click Here To Learn More |
|
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 Making SEO Decisions Tax Splitting Example Take the Lead Start eTutoring Business Canadian Leadership |
|
 | ||
 |
Choose A PR Topic
Press Release Builder | |
 |
Top 50 Diversion Blogs
Top Diversion Blogs of 2009 | |
| ||
 | ||||
| ||||
|
| ||||
| ||||
|
|
|
|
|
||||||||||||
|
Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
|
|
|
| ||||||||||
|
| ||||||||||
|
|
||||||||||