The main idea behind owning a franchise is to utilise the popularity and goodwill of an already established business. Building a venture from scratch takes time; some people do not feel like waiting longer to see it grow. Buying a franchise would be a good option for them.
In this case, you will be selling items that the franchisor produces. It means you cannot sell anything that you will create or offer as services. You have to accept an agreement before owning the franchise.
Different types of costs, starting from franchise fees, advertisement costs and royalties, will accompany this expedition of yours. The primary route to get financial help is by getting a loan from a bank. However, you will need to agree on a few mandatory terms and conditions, like repayment.
Getting a franchise is a good idea as you will not have to put in extra effort in developing the venture. You can arrange an alternative way of getting additional funds for franchise purchases. For that, you can contact business finance brokers as they have knowledge of the lending market.
You can get closer to a loan deal that fits your pocket size and your requirements. Approaching them would mean that you can take advantage of their experience in exploring the market. Now, a question might pop up in your mind about the procedure of taking out loans for a franchise business.
Try to find answers in this blog.
Compilation of steps that encompass getting a loan for a franchise
The cost you will have to cover to own a franchise will be higher than the expenses you will incur to build your own business. It is because you are getting a readymade business to work on. For obvious reasons, the cost of owning it would be on the higher side.
It does not mean you must own the franchise straightaway without conducting the groundwork. You should not avoid some steps.
Working out the cost involved in the process
The most significant advantage of getting these loans is that you will get coverage for the initial and ongoing payouts. Without financial help, getting hands on a franchise is a hefty task. Either you will have to create huge savings, or else financial liabilities will keep spiralling.
You can make use of your savings for the purchase of the franchise. For later outgoings, you can consider getting working capital loans at the same time. These loans will help you minimize the funding gap that occurs because of working capital scarcity.
The various forms of outlays that combine to the overall cost are:
The initial franchise fee – It defines the cost you will have to pay for purchasing the franchise. It can vary from pounds to millions depending on the type of franchise you will pick.
Cost of purchasing tools – The franchise might need you to buy some equipment. Therefore, this cost will also be included in the total price.
Initial inventory – You will have to buy the initial stock from the franchisor or some trusted supplier. This is another cost that adds up to the actual one.
Finalising the location – You might either have to rent or purchase a new premise to start the franchise. Now, this will be a substantial payout encompassing a significant portion of the price.
Getting a vehicle – Depending on the type of franchise you will have, you might have to hire or purchase a vehicle. If you want to purchase it upfront, you must have the initial deposit ready by your side.
Working capital – The business will need constant funds to keep up with ongoing outgoings like the salary of employees, inventory purchases, etc. You should keep additional funds to serve these purposes.
Cost of promotion – It does not matter if you have opted for an already set business. You must shell out money to promote it from your end or else customers will not know about your venture.
Start looking for a loan provider
You can do it on your own or seek the help of a broker – whichever way suits you the most. The lender should be providing financial support that concerns the franchise market. You must check out trade finance if you plan to opt for the franchise from an international location.
It specialises in offering funds to help ventures to trade internationally. On the other hand, you can search for a simple franchise loan provider who can meet your demands. Make sure that you can fulfil their lending conditions.
Some of them would require you to produce a clean credit profile, while others would just the opposite. Weigh your options to understand if getting a bank loan or its alternative is the best decision for you. Go through the lending terms and conditions to evaluate your chances of getting financial help.
Do not forget to look carefully at the interest rates, which are responsible for increasing or decreasing the overall cost of borrowing. Online loan providers specify practical rates so borrowers can afford loan payments without facing any challenges.
Figure out the amount you can take out suitably
Every lender might offer a different borrowing range. Moreover, the type of loan will influence the amount you can fetch. For example, property development loans might allow you to borrow a considerable amount of loans because of the asset factor.
This opportunity might not be available with other loan solutions. Therefore, you must carefully choose the loan category, and that should be based on your needs. If you are aware of the safe limit to borrow, you are already halfway.
This awareness will not let you draw out any random amount. Besides, you must take care of the impact of interest rates as it will add up to the borrowed amount.
The bottom line
Getting financial help from lending sources is neither easy nor challenging. You must project yourself as serious about the venture as possible and draft an effective business plan to be ahead in convincing the lender. You might even get suggestions from the franchisor regarding any matter.
Gary Weaver is a Senior Content Writer with having an experience of more than 8 years. He has the expertise in covering various aspects of business market in the UK, especially of the lending firms. As being the senior member, he contributes a lot while working at TheBusinessFunds, a reputed business loan broker.
Gary performs the major role of guiding loan aspirants according to their financing needs and also to write research based blogs for the company’s website. Previously, he has worked with many reputed business firms and therefore, he knows every nook and cranny of business financing market of the country. Gary is a post-graduate with having a degree of Masters in English language. He has also done post-graduate diploma in Business and Finance.