FUNDING

The track record of the franchisor is important to a bank when assessing whether to lend finance. Franchise opportunities with a good reputation and track record will be ranked higher when it comes to a bank offering finance. For an established franchise, the major banks can lend up to 70% of the costs.

The first step as pointed out in the Preliminary Research is to know how much money you can invest in the business. This may involve your savings or those of your family. Consider what security you can give to back up your loan, you may be a life policy with some value, or have equity in your home.

Having prepared the business plan you should have a clear idea of the financing you will need. There are a range of options available to you if you are looking to finance a franchise. These are as follows:

Business Overdraft - flexible, expensive but you only pay interest on what you use.
Small Business Loan - usually between £1,000 and £25,000. Repayments and interest rate fixed for the life of the loan - normally between 12 months and 10 years.
Flexible Business Loan - over £10,000, fixed or variable rate, 12 months to 15 years.
Enterprise Finance Guarantee - Government guarantee which secures loans, covering 75% of each qualifying loan.
Invoice Factoring - expensive, improves cashflow by releasing 90% of invoice value by the next working day, protects against late or bad payers.
Commercial Mortgage - buying, extending or developing business premises
Business Charge Card - improves cash flow with up to 7-8 weeks interest free credit but you must clear the balance. Can get cash back offers. Buy goods securely online.
Business Credit Card - improves cash flow with up to 7-8 weeks interest free credit but very expensive if you don't clear the balance. Can get cash back offers. Buy goods securely online.

UK banks and other lenders will be able to give you more information on these sources of finance:

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BRITISH FRANCHISE ASSOCIATION

In 1977, the major franchise companies in the UK decided to set up their own association. The British Franchise Association (bfa), was formed to act in the interests of the industry as a whole in assessing and accrediting franchising companies as those which meet its criteria for the structure of the franchise business, the terms of the contract between franchisor and franchisee, the testing of the system and its success as a franchise.

On this site, we only feature franchisors who are either:

Full Members of the bfa
Full Members are established franchised businesses with a proven trading and franchising record. They are prepared to have their reputation examined by the bfa, and have an established network of franchisees.

or

Associate Members of the bfa
Associate Members have proven their ability to launch and support at least one franchised outlet for 12 months and are now in the business of building their network. There will be few franchisees whose experience you can research and a short period of time over which the business has been tested.