Setting up a franchise or purchasing a new franchise territory generally requires significant financial input and therefore often commercial backing. Successfully securing funding depends on several factors including: approaching the right lender and providing a suitable business plan.
Franchisors can often help provide assistance when it comes to business planning and securing funding from an appropriate source. However, franchisors often nurture relationships with just one or two banks. By not shopping around, franchisees can potentially get stung on rates and end up paying over the odds for their borrowing, which could damage the business long-term.
Therefore, a more practical solution is often to use an organisation which can source funding independently. An independent organisation will have relationships with all the main banks, satellite lenders and funding circles and be able to secure the best deal possible.
An independent financial sourcing organisation will initially undertake a viability check prior to approaching any lenders, in order to assess the likelihood of securing borrowing. They will look at an individual’s or company’s background, assets and liabilities and the business idea. Because they understand the criteria for lending from numerous financial organisations, they can help set expectations and avoid time being wasted trying to secure funding applications that will never be approved. Here it is important to provide accurate information to ensure a realistic evaluation and assessment. Armed with this information, they can select the most appropriate lender to potentially back the project.
To secure any business borrowing it will be necessary to provide a detailed business plan. A business plan is a document setting out goals for the future and the strategy to reach those objectives. It will need to include information on cash flow, budgets and projections, but also an analysis of strengths, weaknesses, opportunities and threats. For the uninitiated this can be a daunting task! Leading independent funding organisations can assist applicants in developing a suitable and realistic business plan, using their knowledge from both the banks and working closely with the franchisor (where applicable).
Business plans should be realistic and achievable using existing financial records to help with forecasting. They should also detail milestones and set out a roadmap indicating thresholds when, for example, additional staff can be taken on, or when the business can afford to expand further. A well thought out and comprehensive plan helps avert risk for the business owner and is also essential for the lender to evaluate projections for steady, achievable growth.
So, whether you're starting out, looking to grow, or an existing business, raising finance requires a plan especially designed for your organisation. A workable plan tailored to your goals will help you source funding from the most suitable lender and shopping around using an independent funding expert will help you secure the best deal for the long-term health of your business and its residents.
As a award-winning chartered accountants, business advisory and financial services organisation, d&t, works with numerous ‘big name’ franchisors to prepare the required documentation and develop bespoke processes necessary to source independent funding for new franchisees when they purchase a franchise. Driver Hire, Revive! and Countrywide Signs are just three house-hold names now able to offer the option of d&t’s independent funding sourcing service to franchisees joining their organisations in the future.
Originally posted by Business Franchise Magazine https://www.businessfranchise.com/advice/financial-advice/440/raising-franchise-capital