Franchise Resales - Finance Services
Buying an existing franchise business usually requires some degree of funding or, at the very least, the establishment of business banking facilities. Franchise Resales advice is that when seeking finance for the purchase of a franchise resale it is important to use a bank that has a deep understanding of franchise finance and provides this through it's specialist franchise department. Equally if you are seeking external funding or planning advice it is important to use advisors who are members of the bfa. This way you will receive advice that is totally relevant to your investment by people who understand the UK franchise resales marketplace. The following advice comes from Franchise Finance about their Business Planning and Funding processes and Lloyds Banking Group about raising finance for franchises generally.
Raising Finance To Purchase
Franchise Resales have a strong working relationship with Franchise Finance Ltd. who help prospective franchisees to buy franchises. Their services include a viability study, the preparation of business plans, the arranging of finance and the provision of training courses to help people understand business finance and accounts.
They have a 95% success rate in gaining finance for their clients and are active members of the BFA.
You can learn more about their services by visiting their website which is www. franchisefinance.ltd.uk or by contacting Chris Roberts or Stuart Walsh who are the directors of the company on 08448099144
Here are some recent testimonials from a selection of their clients:
With the help of Franchise Finance I've found a potentially daunting
experience very easy. Thank you once again, I wouldn't hesitate in recommending you to other potential clients".
"I just want to say thanks for the work you have done on my behalf. Tracy at the bank made her decision on the strength of your business plan and I didn't have to say a word".
"Thank you for all the help and assistance Franchise Finance have provided in setting up my franchise".
"I have been extremely impressed with the service that you've provided for me
personally. I'd also like to feedback comments made by who said it was possibly the best Business Plan he'd seen and that it provided all the information required to make a decision on funding for my new business, without asking for any further
"Just wanted to let you know I met with RBS last week and again today. My accounts are all set up and finance is in place ready for me to call down when I'm ready. Many thanks for all your help it all went really smoothly with no problems at all".
Finance options for franchisees
Many people choose franchising as their preferred way of setting up in business and it's not hard to see why. With an established franchise you are investing in a tried and tested business model and a recognised brand name. You'll have the comfort of knowing that the franchise can be successfully replicated and there will be other franchisees within the network giving a track record to judge. On top of this, many people are attracted by training and ongoing support that is on offer to franchisees – which helps them get established. For these reasons franchising is often considered as a less risky way of setting up in business.
Before you take the plunge, however, it is worth noting that not every franchise offers the same level of support. It is essential that you thoroughly research your chosen franchise and territory before making a commitment. Of course, trading performance of any business is also directly linked to the drive and commitment of the franchisee. Not everyone is cut out to run a franchise, so think things through carefully, get professional advice and explore your options.
Common sense will take you a long way in deciding whether the franchise you are considering is right for you. The British Franchise Association produces a Franchisee's Guide, sponsored by Lloyds TSB, which provides valuable information for prospective franchisees. For further details about the guides and support available from the BFA visit their website.
Once you have made your decision, the next step is a business plan. This is the one document you'll need above all else in order to raise finance for the business, which means you'll need to show that you will be able to repay any money you borrow and demonstrate that you understand the business opportunity. However it will also help you set your business goals and measure them. Banks can provide a business plan template for you to use.
A bank will generally expect a franchisee in a well established franchise to make a capital investment of at least 30 per cent of set up costs. For a less established franchise the capital stake needed may be higher. Typically security would be required to cover any loan or overdraft finance that the bank puts in place, but finance terms vary from bank to bank so it pays to shop around for the right deal.
There are various finance options available to franchisees. Loans are usually provided to purchase the business and its assets. Interest rates can be fixed or variable and capital repayment holidays can be arranged. Overdrafts provide flexible working capital support. Debtor and Asset Finance may also be options to consider.
Some banks offer free banking for start up businesses, which can be a real help at the start, but the offers do differ, so again it pays to do your research – and remember to think about what you'll be paying after the free period ends. Banks will be able to provide you with a copy of their business charging tariffs so you can compare deals. Some of the common lending related costs include arrangement fees for loan and overdraft facilities, security charges and property valuation fees.
If you speak to several banks make sure that the person you meet understands franchising and the business opportunity you are looking to invest in. Banks with a specialist Franchise Unit, such as Lloyds TSB are the best place to start. It is also important to understand the level of support that you are going to receive from your business manager once you start trading.
Banks that offer a proactive service with regular business reviews and an option to speak directly with and meet your locally based business manager may be better than those that just operate a call centre banking service, where there is little understanding of your own business and the local market conditions.
Head of Franchising
Lloyds TSB Bank plc
Tel: 07802 324018
Richard heads up the Lloyds TSB franchise team and is a regular contributor to trade publications and national press. He is on the panel of judges for the prestigious Franchise Marketing Awards and regularly speaks at franchise seminars and exhibitions. Lloyds TSB are affiliate members of the British Franchise Association.
Franchisee financial guide
Franchising is generally regarded as a less risky way of setting up in business than if you were to start your own independent business. Although as with any business opportunity there are still risks. It is essential that anyone considering investing in a franchise thoroughly researches the market and takes appropriate professional advice. The bank's Franchise Departments are able to provide general guidance about franchise opportunities. They will also be able to assist you to carefully assess whether franchising will be the right option for you, what questions you should be asking a franchisor and help to get your business started.
Banks will require a business plan to set up a bank account and consider financial support for your business. Any lender will want you to demonstrate that you understand your chosen market and that you will be able to meet the financial commitment you are taking on. Banks will be able to provide a business plan template detailing what information should be included in the document. Some franchisors will support you in developing an effective business plan.
The business plan should be punchy and a common mistake is to make it too detailed. Ensure that it grabs the bank manager's interest. Presentation of the plan is important to create a positive impression and you should practice delivery of your plan beforehand so that you come across professionally. Let the bank manager have a copy of your business plan in advance so they can prepare for the meeting. Expect your plan to be challenged and you should be able to confidently answer questions about the operational and financial aspects of your plan.
It is often assumed that a business plan is needed just to secure funding. Whilst this is an important benefit of producing a business plan it can also assist with the management of the business such as monitoring the ongoing performance against the original benchmarks and identifying areas for development. The plan is a working document and should be regularly reviewed and updated as the business develops.
A business plan should cover the following areas:
Personal details (Contact details, Age, Martial status, Dependants)
Franchisee's experience, skills and attributes
Objectives / Mission Statement
Overview of the franchise
Local market (Research, Location, Customers, Competitors)
Business operation (Premises, IT, Vehicles, Equipment)
Key Personnel / Management team
Capital stake and Security
Personal Assets, Liabilities, Income and Expenditure statement
Financial Projections (Cashflow and Profit & Loss forecasts)
3 years Financial Accounts (Existing businesses only)
SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats)
When looking to finance your franchise business it is best to approach a franchise specialist bank. The bank's franchise departments regularly evaluate franchises and monitor the ongoing performance of franchisees. Preferential terms are often available from these banks, particularly for well established and proven franchise opportunities. Banks without franchise units tend to treat franchises the same as a new independent start up business.
The level of finance available from a franchise specialist bank will depend upon the strength of the franchise system as well as your business plan. Typically for well established franchises the bank will lend up to 70% of the total set up costs including working capital. For newer, less proven franchise systems the amount of finance available maybe reduced. The bank will probably require security for the loan which commonly will be a legal charge over a residential property with sufficient equity.
Don't be put off if you haven't got any security to offer the bank. The Government backed Enterprise Finance Guarantee Scheme maybe available for those who have a strong business proposal, but who lack security that the banks usually require. Speak to the bank's Franchise Unit to discuss whether you qualify for finance under this scheme. Advice is also available on other financing options for your business such as Asset Finance, Leasing and Debtor Finance.
The bank manager may take a few days to review your plan and financial requirements. They may need to obtain sanction for the requested funds from the bank's Credit Department. Once the lending has been sanctioned the bank manager should set out in writing the terms of the agreed finance including the costs. If you wish to proceed then confirm your acceptance of the bank's terms and the bank manager can prepare the documentation and security arrangements. You should be aware that it is likely to take several weeks to complete the security requirements. Work closely with the bank manager to ensure that there are no delays in releasing the funds and for you to attend the franchisor's initial training course.
It is sensible to have sufficient capital to cover projected expenses for at least six months. Have a contingency reserve fund to fall back on in case the business takes longer to get off the ground that you have anticipated.
Some banks like franchising as you are investing in a tried, tested and proven business model with initial training and ongoing support from the franchisor. Finance is readily available at preferential terms for franchise investment from banks that have specialist franchise departments, such as the Lloyds Banking Group. Come and talk to our trained franchise managers at our business planning kiosk at the major franchise exhibitions.
Head of Franchising
Lloyds Banking Group
Tel: 0800 681 6078
Mobile: 07802 324018
Richard Holden heads up the Lloyds Banking Group Franchise Unit and is an expert speaker at exhibitions and seminars. He also regularly contributes in the national and trade press. The Lloyds Banking Group has franchise managers based throughout the UK to offer support to both franchisors and franchisees. Lloyds TSB are affiliate members of the British Franchise Association.