Financing Your Dream: How to Fund Your Franchise?
Starting a franchise is a big step, not least financially. The good news is, there are several options to fund your dream of going into business – and a good franchisor like Signs Express will help you every step of the way, from introduction to lenders to business plan assistance.
The first thing to note is that lenders like the franchise model. As well as reducing the risk of business failure, franchising gives them evidence and historical data of what can be (and has been) achieved through the performance of existing franchisees. A key part of the lenders’ decision-making process is understanding the forecasts in a business plan, and with a franchise they know whether the figures provided are achievable.
All the major high street banks have dedicated franchise teams, who understand how franchising works. It is important that the application is introduced through the right channels: a banker who does not understand franchising will not know the benefits and why it is a more appealing application than a standalone business. After working with Signs Express for many years, they also understand how the business model and franchise support team works, which is a big advantage for new franchisees.
How much can you finance?
For an established franchise network like Signs Express ours, with decades of data and figures from dozens of franchisees to rely on, banks will typically lend around 70% of the total start-up cost, subject to your personal financial and credit history. That means you will need to provide at least 30% of the cost in liquid capital, your own money.
At Signs Express, our franchisees often use asset finance for part of that 70% funding. Asset finance spreads the cost of equipment, such as a printer, plotter and laminator over a fixed number of years, helping to minimise the initial cash outlay. Instead, you pay the asset finance off over time whilst the business is trading.
A proper business plan is an essential document to obtain funding, but it is also so much more than simply a means to get your finance – it is your roadmap for business success.
If you have never created or seen one before, do not worry – most new franchisees have not either. Most lenders will help you prepare a business plan, however we can also provide support and assistance with creating a personalised plan, one which both secures your funding and keeps you on track to achieve your goals.
The plan will outline both your business financials, using our experience on what you are likely to achieve in turnover and profits; and your personal goals for the business.
Length of loan
The loan term to start a franchise will never be longer than the term of the franchise agreement, but it can be shorter. The term will be determined by affordability and the bank’s own policy on the franchise business. Payments are typically monthly, and these financial commitments will be built into your business plan to demonstrate affordability to the lender.
What do the numbers look like?
Taking the proportions above, to start a new Signs Express franchise the breakdown is:
- £65,000 of your own money
- £110,000 in bank funding
- £40,000 in asset finance
Total start-up investment, including working capital: £215,000.
These figures can vary depending on location – property and employment costs can be more or less expensive in some areas for instance – but this is the typical investment breakdown.
To purchase an existing business, a ‘franchise resale’, the investment cost varies according to the financial performance of the business. You can find details of our existing centres for sale here.
We pride ourselves on complete transparency in the process of becoming a franchisee, so you can expect a full and open discussion on the financials behind the franchise during and after attending a Discovery Day.
Not sure which is the right option for you?
Speak to our dedicated Franchise Recruitment Team directly…
Get in Touch
For more information about our franchising opportunities, please contact us using our Enquiry Form and a member of our Franchise Recruitment Team will get back to you as soon as possible.