So you’ve decided to invest in a franchise as a way of starting your own business, but you’re not yet sure where the finance will come from to make it all happen.
The good news is, even during these uncertain economic times, there are a number of options available to you, so let’s take a closer look at some of the most popular current methods of securing financial backing.
Bank (but not necessarily your normal bank) loan
Banks are the first place many people turn to when looking for a loan to support a new franchise.
Don’t automatically settle on the bank where you have your account, just because you have their number already stored in your mobile. The sum of money involved is likely to be high, so it will be worth your while to put the legwork in to find the most competitive offer available.
To give yourself the best chance of getting what you want, make sure that all your ducks are in a row before you approach the prospective lender.
That means, among other things, putting together a well-considered business plan. The bank will want to see that proper thought has gone into your venture. For a new franchise, your business plan should include, at the very least, an overview of the franchise, financial projections and marketing strategies, as well as your own personal details. The more detailed the picture you paint, the more likely that the bank will share your vision and lend you the money that you need.
The Enterprise Finance Guarantee (EFG)
You’ll need an asset, such as property to secure a loan to start your franchise, but not everyone is lucky enough to own something suitable they can use. That’s not necessarily a problem.
The Enterprise Finance Guarantee is a scheme run by the Department for Business Innovation & Skills. Make a successful application and the government will guarantee up to 75% of your bank loan amount. That means you only need to provide security for 25% of the amount you want to borrow. Providing you want to borrow between £1,000 and £1,000,000 for between 3 months and 10 years, then you could be in luck.
Personal loans come with a different set of rules and regulations from business loans, and you might find they provide a bit more flexibility that suits you better. For example, personal loans can be used to cover not just the franchise fee, but also things like equipment and training costs.
In many cases, personal loans come with a lower interest rate than a business loan. But, as with a business loan, don’t just jump at the first one offered. Spending a few hours researching online what’s available in the marketplace will be time well spent. Make sure the lender you choose is credible and that you compare all the terms not just the headline rates which can sometimes prove deceptive.
Find a partner to go into business with
Have you ever thought about going into business with someone else? Obviously, it would need to be someone you could work well with but, if you’re struggling to find the finance you need to buy a franchise, this might be the perfect answer. In this particular case, a problem shared could well be a problem solved. It’s a simple matter of mathematics. If you’re struggling to reach a figure, dividing it by two might bring it within your reach, and help set the ball rolling.
Family and friends might also be willing to provide financial support when starting a franchise without taking an active role in your business. If you go this route, make sure your agreement clearly outlines all the details to avoid uncomfortable disputes down the line that could jeopardise an important personal relationship.
Banks might be the traditional route to finance but, if you’re younger and more entrepreneurial, you may be tempted by one of the more contemporary financing solutions such as crowdfunding.
This method enables aspiring franchisees to raise money from a pool of individuals who agree to invest small amounts in your business in exchange for a return on their investment. You’ll find more about how crowdfunding works and what it’s likely to cost by checking out websites like Kickstarter and GoFundMe or by doing a little desk research of your own.
Startup loan for franchisees from British Business Bank
Here’s an option you might well not be aware of: as a potential franchisee, you could be eligible for a startup loan from the British Business Bank.
The Start Up Loans programme is funded by the Department for Business, Energy and Industrial Strategy (BEIS) and is delivered by The Start Up Loans Company (SULCo), a subsidiary of the British Business Bank.
The programme aims to encourage entrepreneurship in the UK, increase the rate of business creation and improve survival prospects. It offers loans (from £500 to £25,000), alongside free mentoring and support to individuals who are starting a new business or who have been trading for less than three years.
Swimtime Starter offer
A good financing option with many franchise networks is their special in-house solution. At Swimtime, the UK’s largest independent swim school, that’s something we offer to make life easier for those looking to join us.
The Swimtime Starter Franchise starts from just £8,000 + VAT, with finance available (subject to status). This means you have the chance to get up and running for a modest initial payment.
As well as securing you the finance you need at the outset, at a competitive rate, you will also receive all the standard benefits that come with a Swimtime franchise. These include a proven business model with a 20-year history and industry-leading levels of customer satisfaction.
If you’d like to find out more about the Swimtime Starter Franchise package or anything else to do with investing in our successful franchise model, please just follow this link. We’d love to hear from you and we’ll be delighted to answer any questions you might have with no obligation whatsoever.