Funding Bay Blog

How to get a business loan funding for a franchise business?

Starting a franchise business may be less risky than setting up a regular small business, as you will have an established brand name to work with, and your franchisor may also assist with marketing and provide business training. A business loan may your business kick start!

Nevertheless, you might still need funds to purchase the franchise, and/or need money to get the business up and running – you might, for example, need to purchase business premises and/or stock. 

If you are an established franchise business, you might still want funds to: 

  • Fund expansion or growth, such as moving into new premises or offering new products and services 
  • Fund a marketing campaign 
  • Take on new staff 
  • Meet operating costs during times when business volumes are lower 
  • Acquire another franchise business 
  • Upgrade your equipment 
  • Carry out refurbishments at your business premises 

This all means that, as a franchisee, you might want to borrow money and so, apply for a business loan. The fact that you have an established brand name to work with could also help you here, as a lender might be more willing to lend to you compared to a regular small business. 

What do I need to apply? 

The things you need to consider before applying for a business loan include: 

  • How much do you need? 
  • How much can you afford to repay each month? 
  • Which lenders might provide the funding you are seeking? 

If you are applying for a larger amount, it is likely that you will need to submit a detailed business plan, which should include: 

  • A summary of what your business does 
  • How your skills, qualifications, knowledge and experience will help you succeed in running the business 
  • An analysis of your target customer base, and of your competitors 
  • Cash flow and profit and loss forecasts 
  • Details of the management and key personnel within the business 
  • Information regarding the marketing strategy you intend to employ 

The best lenders might be those with experience in the franchise market. Here we look at what two companies who specialise in franchise business loan fundings might be able to offer. 

Hitachi 

Hitachi has had a dedicated Capital Franchise Finance operation for more than 40 years. It intends to re-brand as NOVUNA Business Finance early in 2022. 

The company works with franchisors, new franchisees and established franchise businesses, and works with a range of lenders to find a funding solution that meets your requirements.  

As well as supplying you with much-needed funding, it can assist with business planning and training needs. It provides assistance with drafting business plans, strategic planning, accounts and finance, business networking and much more. 

Capify 

Capify has 20 years experience of in providing funding to businesses. It offers loans of between £5,000 and £500,000 to franchisees. 

It can potentially help fund any franchise business, but its website suggests a number of established companies, in different business sectors, that you might want to franchise for. These include Subway, Papa Johns, Kumon Education, SPAR and Vodafone.

Franchise opportunities are, however, available in a wide range of business sectors. They aren’t just for hospitality and retail, and you might also be able to franchise in sectors as diverse as health and fitness, sports and leisure, accountancy, financial services, business administration outsourcing, legal services and funeral services. 

With Capify, you can choose a repayment term of between one and 12 months, and its website has an easy-to-use calculator to give you an indication of what your repayments might be for terms of differing length. The typical annual interest rate on its franchise loans is 20%. 

Unlike many lenders, Capify gives you the option of making daily, bi-weekly or monthly repayments. 

What are the other features of franchise business loans? 

The typical loan offered to a franchise might offer some, or all, of the following: 

  • The option to borrow up to £500,000 
  • The opportunity to choose a repayment term of anything from a few months to several years 
  • No early repayment fees 
  • The opportunity to take repayment holidays 
  • Approval within 24 hours of application 
  • Funding that is available to you regardless of whether you operate your franchise as a limited company, a partnership or as a sole trader 
  • The chance to apply for top-up loans 

However, you should always check the exact terms and conditions being offered by any lender you are considering. Here at FundingBay, we have access to a large number of lenders and can help you find the right product for your individual circumstances.

What forms of finance might be available? 

In addition to term loans, franchisees might also be able to access these forms of finance: 

  • Overdrafts 
  • Credit cards 
  • Asset finance – where you borrow against assets your business already owns 
  • Invoice finance – where you receive an upfront payment every time you issue an invoice to another business 

Get in touch with the team at Funding Bay to find out your best funding option!

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