What Franchise Issue 21.1

Some brands offer in-house financing or allow staged payments of the franchise fee. Others can introduce you to preferred lenders who already understand the business model. Private investors, business partners, or even family support can also play a role, though it’s crucial to document any agreements to avoid future misunderstandings. Making yourself an attractive borrower Whatever combination of finance you pursue, lenders need to see that you’re a safe bet. A polished credit profile, realistic forecasts, and a clear commitment of your own capital all help. Management experience – whether in the same sector or not – can strengthen your case, as can a franchisor with a solid track record. If you can offer collateral or a personal guarantee, you’ll often get better terms. One thing to watch is optimism. It’s natural to get excited about sales projections, but lenders will scrutinise every line. Base your forecasts on real franchisor data, not wishful thinking, and always include a contingency fund for those inevitable surprises. Common pitfalls The biggest mistake new franchisees make is underestimating working capital. Many fail not because the concept is flawed, but because they run out of cash in month three. Others blur personal and business finances, making it hard to track performance or satisfy lenders. And don’t ignore seasonality. If your chosen sector is prone to quiet periods, plan accordingly. Ultimately, funding a franchise isn’t just about getting the money; it’s about structuring it so you launch with breathing room and stay in control as the business grows. Prepare early, stay realistic, and you’ll give yourself – and your new baby – the best possible start. “It’s natural to get excited about sales projections, but lenders will scrutinise every line. Base your forecasts on real franchisor data” I often see businesses miss out on the most affordable funding simply by providing information that triggers an automatic decline – something that’s very hard to appeal. A broker’s value lies in packaging an application so that an underwriter – whether automated or a real person – is more likely to approve it. Different applicants, with different credit profiles and levels of experience, shouldn’t be using the same funding lines or submitting the same type of application. As an example, in the last fewweeks we arranged funding for a large multi-site franchisee in the fast-food sector who was setting up a restaurant in a new franchise brand. We used the financial strength of his existing businesses to support the application. Also this month, a well-known gym brand approached us on behalf of a first-time client who needed funding for their debut venture. With no prior experience and no current business, we had to obtain detailed business plans and more thorough personal credit profiles, then work with several non-mainstream lenders – each providing smaller ‘chunks’ of funding – to meet the full requirement. An interesting aside – we’ve even funded the purchase of a brand-new Lamborghini for a successful multi-site franchisee in recent weeks. It’s not just the boring stuff we can fund!” 31 WHAT-FRANCHISE.COM Ins ights