Starting any business is hard work. It typically requires a large outlay before you start seeing returns. Buying a franchise has all these challenges, but in many ways, franchise finance is different to financing other kinds of businesses.
Franchises range from mobile dog grooming to food stalls in shopping centres and major national brands. But all franchises require a level of financial commitment to get going.
Like with other businesses, there are various ways to finance a franchise. However, there are some unique franchise finance options.
Loans are a common way of finding finance. The difference for a franchisee is that some banks are more willing to finance a franchise than a start-up business, because they see that the franchise’s framework makes it more likely to succeed.
Some banks have a franchise accreditation program. They give certain franchises a ‘stamp of approval’ as such to affirm the franchise’s viability.
Some franchise systems offer a form of finance to prospective franchisees. The franchisor bears the brunt of the start-up costs and the franchisee pays it back over time.
It is common for a would-be franchisee to get financial backing from their family. Family finance can be effective, but it comes fraught with complications. If you are considering using personal relationships to fund a business operation, be careful to weigh the wider implications.
In order to cover the cost of starting or buying a franchise, you will probably have to provide at least part of the payment straight out of your own pocket, or by offering property as security. It is not uncommon for a franchisee or their family members to take out a mortgage in order to get started.
A franchise can be a great way for you to start your own business. The structure and brand already exist. With careful research, you can find a successful model and potentially learn from other franchisees in the system.
The initial outlay, like with any business, ranges, and can be quite high. But there are also finance options open to some franchisees that you might not be able to access otherwise.
If you are considering buying into a franchise, talk to our professional finance team. We will help you explore your options and discover the best possibilities for you.