So, you have done your research and homework to identify the franchise that is right for you. Arranging how you will pay for it is just one of the many potential pressure points in the process of becoming a franchisee, so the more prepared you are the better when embarking on your discussions with a bank to apply for finance.
Going to a bank and applying for finance to purchase or set up a business can be daunting. This doesn’t need to be the case with some pre-meeting preparation and research.
An important part of this is preparing a business plan. One of the main reasons many businesses (including franchises) are not successful is because they fail to plan. It is vital for the long term sustainability of your business to take the time to develop a business plan. Westpac provides support for business owners on how to prepare a business plan through our business bankers and also through our Davidson Institute (Westpac Financial Education).
See website located at:https://www.davidsoninstitute.edu.au/
Many business owners, customers and noncustomers alike, have completed a range of the courses on offer and gained invaluable business knowledge and insight.
Other banks may also have tailored a complete package for their franchise partners which will typically include financial solutions specific to your franchise system, for example including a group merchant deal.
Your banker will need to assess your financial capacity, both personal and for the business you are buying. In regards to the franchise you are purchasing, a copy of prior trading results, cash flow projections and breakdown of your funding requirements plus a business plan will greatly assist your banker understand the financial dynamics involved. A copy of the franchise and lease agreements plus a full list of your set up costs if you are setting up a new store, are crucial.
The type of security the bank will require will vary depending on the franchisees borrowing requirements. At Westpac with our accredited franchise partners we have funding structures that enable us to consider applications without having to provide a home or other collateral security for the loan, however, this depends on the applicant’s specific funding requirements.
One of the benefits of buying a franchise is the operational training and support provided by the franchisor. Your level of prior management experience is also considered as part of the loan assessment process so also include a detailed CV in your business plan that highlights any skills and education that you have undertaken that will assist you in running a business.
Banks may also have accredited the franchise system, assessing the system in terms of its business model and other key aspects. A bank accreditation creates many potential opportunities and benefits for a franchisor, including the possibility of growing their franchise faster (creating greater economies of scale and negotiating ability with suppliers too) which in turn benefits the franchisee. For a franchisee, dealing with accredited franchise specialist bankers who have the experience, capability and understanding of the business you are purchasing will certainly lower the stress in applying for finance.
Obtaining advice from your business advisor, business accountant and lawyer, preferably skilled in franchising, is invaluable and definitely recommended. These advisors are able to recommend and advise on business structures, tax planning, GST obligations and book-keeping. It is also beneficial to speak to existing franchisees who already own a franchise to understand what will be involved in the day to day management of the business and the type of support provided by the franchisor.
And finally, but no less important, is family support which is critical to the success of any business. Buying a business can be both exciting and daunting all at the same time so it is important to consider how this will impact on you and your family.
Ian Watt is the Senior Business Development Manager – Franchising, NSW & ACT Westpac continues their long-term commitment to franchising in Australia.
The bank has a national network of franchise specialist business bankers who are able to deal with the specific needs of the franchise sector.
Contact Ian at:
P: 0419 271 995