The initial franchise fee, marketing costs, and ongoing operating costs means buying a franchise may require a large amount of capital.
All businesses need capital when it comes to starting up, and franchises are no different.
Here at Home-Xperts, we’re able to make this whole thing a lot easier by helping prospective franchisees get funding from Star-Up Direct.
Now more people who would have originally been deterred by the initial investment and take the leap and are able to run the business they dream of.
Do you need captial?
While you may have some of your own money to invest, it’s likely you’ll need additional finance for your franchise start-up.
Friends and family may be prepared to support your new business financially, but most franchise owners will need to raise finance from a bank or another lender.
We already know that buying a franchise is a safer option than starting a business from scratch.
A record 97% of franchisee-owned units reporting profitability (British Franchise Association January 2016) compared to a report produced by Forbes that 9/10 start-ups will fail within the first five years.
A lot of the worry of running a new business is alleviated as a franchisee, as you will be using a proven business idea to work with and an established business model to follow.
You’ll receive training and support from your franchisor and have the support from a network of fellow franchisees. To be successful, you’ll still need to prepare your franchise loan application carefully.
So, here are our top tips for getting funding for your franchise.
Research your franchise costs
Before you start looking at the different loan options for starting your franchise, it’s important to fully understand the costs involved in getting your franchise business up and running.
These may include an initial franchise fee, training fee, initial stock, equipment purchases and promotional costs. You’ll need enough working capital to carry you through until your business starts making a profit.
Having now established some of the costs you can now consider the potential profits of the franchise. It’s important to be realistic with this.
To get accurate financial forecasts for your franchise its best to speak to your franchisor to understand how their financial forecasts have been calculated, which should be based on actual trading figures from existing franchise owners.
How much can I borrow?
The level of finance on offer from lenders will depend on several factors.
With established franchise brands such as HomeXperts, the prospective franchisee could acquire up to £25,000 with no deposit to fund the franchise.
This is is achieved through Start-up Direct which is a delivery partner of the Governments Start Up Loans Scheme. In addition to the funding, they provide 12 months free mentoring and extensive support through regular workshops and events.
They are developing an exciting range of start-up initiatives designed to help and support you as you grow your business, more information about Start-up Direct funding can be found here: https://www.startupdirect.org/about-us/
You could also utilise the funding from the major highstreets banks such as Lloyds, NatWest and HSBC. With up to 70% funding with a 30% deposit.
So, if you are considering financing your franchise via a loan but haven’t quite got the capital to fund the business yourself. There is plenty of options out there. And if you’d like to find out more about franchising with HomeXperts, Click here: http://www.home-xperts.co.uk/