Franchising can be expensive.
Depending on the franchise, you pay anywhere in the region of £500 to £1million, so getting some funding is imperative. Fortunately, there are ways to obtain this funding and ease the financial pressure.
One way to finance your franchise journey is to speak to a bank, though there is never a guarantee that you will be successful with this route and you will most likely have to invest some of the capital yourself. You will also need to prepare a solid business plan and convince the bank that you will be successful. Fortunately, there are other ways that you can find funding if you are unsuccessful with this route.
Grants and the New Enterprise Allowance
Grants can be awarded depending on your location and circumstances. There is also a criteria that you will need to meet in order to get the best possible grant, and a lot of the time, the money will be used for a specific purpose i.e. tools and training. There are various avenues for you to explore, such as approaching the Department for Business, Innovation and Skills and local authorities.
Unlike grants, the New Enterprise Allowance provides small loans of around £1000. These are typically offered to individuals that have been on Jobseeker’s Allowance for three months or over and can assist with managing your start-up costs if you have a solid business idea. As this is only a small loan, it can be especially useful for franchises with low investment or start-up costs.
When it comes to applying for grants, take your time and look at as many options as possible to ensure they are really right for your franchise. Grants are mostly used to help with start-up costs and providing training or equipment, so use them wisely!
Community Development Finance Institutions
More commonly known as CDFIs, these organisations aim to create wealth in disadvantaged areas or communities. They strive to do this by awarding loans to individuals to help with certain areas of their business or franchise, or provide first-time business owners with some vital start-up capital. Because each CDFI works with specific businesses, individuals and/or industries, it is worth taking your time in researching the CDFIs around you before opting to apply for funding through this route.
If you get a business angel investor on board, you are doing well! These individuals have a high net worth and business knowledge, and will always be keen to invest in your franchise if there is a high potential for growth. Business Angels also usually possess great industry knowledge too, and their expertise can be just as valuable as the potential funding.
A relationship with a business angel is two-way, so be sure you are committed and you have a well-written business plan before you start looking at potential investors.
This has become very popular with business owners and some websites out there allow you to pitch your business directly to investors. Also known as peer-to-peer lending, crowdfunding can help you with getting your franchise up and running as well and can help you manage your start-up costs.
Friends and Family
Finally, ask those closest to you! Though your friends and family will no doubt trust you and will be keen to help where they can, treat this in the same manner as the funding options mentioned above; show them your business plan, draw up contracts, and be clear on how the franchise will be run.
This investment will alter your relationship, so keep your investor informed of what is happening within the franchise and do not be afraid to bring up the issue of risk. Whenever you meet up with them to speak about the franchise, do so in a professional setting, just as you would with any other investor.
These funding platforms can all help you get your franchise journey started. If you would like some more advice, or if you are ready to take the next step, speak to us here at Reed Commercial.Tags: cost, finance, franchise, funding