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Franchise Finance: Franchisee

Getting the right franchise finance is an important part of becoming a franchisee.  One of the most common reasons for looking at a franchise opportunity is to make money and most people need franchise finance to help get their franchise business up-and-running.  Like any business, there are risks involved and you should have a thorough understanding of those risks before you buy.  

Your choice of franchise finance can make a significant difference to the profitability of your franchise business.  The right franchise finance can give you the ability to pay the loan off sooner, or give you access to cash, or payment flexibility should you need it.

Sources of Franchise Finance for a Franchisee

There are several sources for franchisee franchise finance available.  Of course each comes with its own advantages and disadvantages, and again you will need to evaluate which is the best franchise finance option for your circumstances.  Some of options for franchise finance for a franchisee are:

• Banks: This is the most common franchise finance option.  Many of the major banks have specialised programs for franchise businesses. Many offer packages that account for the strength and trading history of the franchise brand, and can have less onerous requirement than a standard business loan.  In some cases, the bank can offer a franchise finance loan that does not need a home for security.
• Finance Brokers: A broker can help negotiate a franchise finance package with the bank, and receives an ongoing commission over the life of the loan for their services.  A franchise finance broker can be helpful for evaluating the options in the banks' offers, and will act as the liaison with the bank.  As they receive an ongoing fee it is worth checking out what is on offer with the banks directly to ensure you are receiving the best terms for your situation.
• Savings: Some franchisees will have the ability to fund the costs of the franchise from their savings.  This option will allow you to save on any interest costs, which can represent a significant amount.  If you are considering this option you may ask yourself 'what else could I do with these savings', or evaluate the opportunity cost.  For example if you could use that money to pay off your mortgage and secure franchise finance in another way, there may be good reasons to do that.  A good accountant will help you choose the right franchise finance option for you.
• Family: Family members can be another source of franchise finance for your franchise business. They can often offer more flexible payback arrangements. This option can have some negative consequences, and may put pressure on the family relationship should the franchise business not perform as hoped.

Getting Franchise Finance Advice

Whichever franchise finance option you choose, spend some time working with a good accountant. Their advice can help you make the best choice for your individual circumstances.  An accountant who is familiar with franchising and your chosen franchise business can ultimately save you money.  Asking other franchisees of the franchise who they use, and if they are satisfied with the service they receive is a good place to begin your search for a good franchise accountant.

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