What Franchise Issue 21.1

assets you might use as security. The stronger your personal position, the easier it will be to negotiate favourable terms. Funding paths worth exploring When it comes to funding a franchise, most UK franchisees end up blending a few different options to cover the full start-up cost, often starting with a specialist franchise loan. It’s easy to see why traditional bank loans remain a popular route to franchise funding – they’re straightforward, relatively affordable and often backed by government start-up schemes. Big high-street names like Barclays, HSBC, NatWest and Lloyds all have franchise teams and long-standing relationships with well-known brands, which can give you a real advantage. If you’ve got a solid business plan, a good credit record and a franchise that’s on a bank’s “approved” list, you could borrow as much as 70–80% of the total investment. Government-backed schemes are also worth a look. The Start Up Loans programme, for instance, lets you borrow up to £25,000 at a fixed interest rate with up to five years to repay, and mentoring support thrown in. There’s also the Enterprise Finance Guarantee, which can help if your business is viable but you lack the security for a traditional loan. For franchises with heavy equipment needs – think gyms or cafés – asset finance or leasing can free up cash. Instead of paying upfront, you spread the cost or lease the kit, preserving capital for other expenses. Some franchisees also use overdrafts or revolving credit facilities to smooth day-to-day cash flow, though these come with higher interest and should be handled carefully. And don’t forget to ask the franchisor. Before you apply, run through this quick checklist: • Do you have a detailed business planwith realistic forecasts? • Personal investment of at least 20–30%? • Good credit score and clean financial history? • Evidence of franchisor support and trading performance? • Collateral or personal guarantee (if required)? • A cash buffer for at least three to six months of operations? Tick all of these boxes and you’ll present yourself as exactlywhat lenders are looking for: a well- prepared, low-risk franchisee with the discipline to turn a good brand into a thriving business. A R E Y O U L O A N - R E A D Y ? Expert insight:Why a finance broker can openmore doors “Many sectors have long used finance brokers to help secure the right funding for their business or to facilitate the sale of their product. But the franchise sector has been slower to catch up, only recently realising that the high street banks are not the ‘only show in town’ and that an FCA-registered broker can offer a wide range of products and lines of credit, often with a more personal service too. Conventional loans are still popular, but more and more franchisees are now turning to asset finance products such as equipment leasing and hire purchase agreements to fund new projects or upgrade existing sites. An experienced and reputable broker, such as Satellite Finance, can take the time to talk through your requirements and explain exactly what you’ll need to provide to satisfy a credit underwriter, while also discussing the funding products that best fit your business plan and forecasts. Where a bank may have a limited appetite for risk or existing credit exposure with a client, a business finance broker can draw on access to many different lenders with different lending criteria. In some cases, it can even make sense to split the funding between more than one lender. Satellite Finance, for example, works with a panel of over 60 lenders, each with its own acceptance criteria depending on the franchisee’s credit profile, the reason for the funding, and the franchise brand itself. Jon Beese, Director of Satellite Finance, explains how specialist brokers can give franchisees a crucial funding edge 30 WHAT FRANCHISE Issue 21.1