With the growth in popularity of price comparison websites we all understand the benefits of shopping around to get the best possible deal. A major advantage of these sites is that they do all the groundwork for you. Unfortunately, when it comes to financing a franchise opportunity there isn’t a one-stop shop to secure the best funding deal for your business.
That means that there is an onus on both the franchisor and the prospective franchisee to understand what is available in the market and shop around.
It would be convenient for the business owner if there was one lender that stood head and shoulders above the competition in all instances, however this is not the case. There are significant benefits in approaching lenders that have specialist franchise teams to get the prompt and professional support you are seeking, however which one should you choose?
The simple answer is you don’t just choose one lender to speak to. It can be a time-consuming process to approach several lenders with a proposal, so this is where the franchisor can really add some value and provide invaluable insight to a would-be investor.
Franchisors should be speaking to the franchise teams of all the specialist banks to get an understanding of the financial packages and support that maybe made available. Each bank will have their own policy on lending to different markets and franchise brands that operate in the industry sector.
Banks will determine their appetite to finance depending on their overall exposure to the sector and their existing debt profile. The same can be said for individual franchise brands as well as the bank’s assessment of the strength of the model, training and support. So each bank could have a different approach towards franchisee lending of a brand.
Some lenders have a much greater focus on the more established franchise models and franchisees building a portfolio of multiple outlets, whilst others maybe a better choice for the franchise brands that are new to the marketplace.
At Lloyds Banking Group we are committed to support the growth of the entire franchise market in the UK, funding the smaller operators as well as the multi-unit franchisees with larger lending requirements.
Consistency of service
Whilst the financial terms available are important they are not the only consideration. The consistency of service provided by the bank also requires attention.
Some banks farm out enquiries to local managers with little or no franchising experience, whilst others handle all lending applications within their knowledgeable specialist franchise team. It therefore makes sense for the franchisor to speak with all of the banks to establish who is likely to be the best fit for their own franchisee network.
Franchisors have a duty to provide fundamental insight to investors, ensuring that they speak to the banks that are likely to offer them the best service and very competitive lending terms. They should also speak with all of the banks franchise teams to provide regular updates as the franchise model and network develops and matures, ensuring that the bank maintains current information on the opportunity.
It is nevertheless the responsibility of the business owner to speak to more than one lender to get the best possible deal for them.
The initial approach should be through a bank’s franchise unit rather than a local manager. That will ensure that the business owner receives prompt and professional assistance from specialists and give themselves the best possible chance of securing the financial support that they are looking for at the most preferential terms.
Source: Franchise World