How to obtain the funds to make your franchise dream a reality
When it comes to raising finance to buy a franchise, your first port of call should be an independent commercial finance broker.
Over the last couple of years the job at the bottom of your list has probably been dealing with the bank. For those wanting to own a business it has been the real obstacle in taking the decision to start the business and for those already running a business, the Bank Manager is often a faceless person and there is a fear of approaching them for new lending as they will scrutinise your existing arrangements, which may well rock the boat.
For those people who are put off buying a franchise due to needing to raise finance it really is worth getting an independent opinion. Invariably the most difficult aspect of getting a loan agreed is dealing with the correct person in the bank. When you make an enquiry about a business loan you will normally be directed to the Local Business Manager, while this may be the best solution if you are looking purely for a bank account it certainly won't be the best person if some analysis of the business is required to make an informed lending decision.
Most lending decisions are now not made locally but go to a central credit department. These credit departments are seeing hundreds of lending applications a day and have to make fast decisions. They may well only have 10 minutes to fully analyse and decide whether they want to support what has been presented to them. It is, therefore, key that any lending proposition covers all the key areas, is to the point and leaves them looking for a reason to say no rather than a reason to say yes. This kind of lending is definitely "not computer says yes", but a skill that is developed, a skill that takes years of training. Unfortunately most Bank Managers that you will be directed to when starting a business will not have the experience to do this and that is why many potential business owners are put off at the first step when dealing with banks.
My advice would be not to be disheartened if your existing bank has declined your business loan. My second bit of advice would be don't be hasty and approach every bank, if you do this they may all do a credit search on you and knock your credit score and also may not look at the proposition again even if presented in a far clearer way. Also, if the bank that you know has declined you a bit more work may be needed in presenting the proposition to another bank else the chances are you will get a similar result.
For existing businesses there has been a fear to speak with your bank. We have all read the horror stories and have it in our head that the bank will automatically say no to any new lending request, they may even look at the proposition and decide they want you to rebank the whole relationship. In reality this happens in very few cases and I would always recommend staying as close as possible to your bank and forming a good relationship. I would also suggest reviewing what else is available in the market on a regular basis, your bank is a key partner to your business and while we all want loyalty to be rewarded, in the real world a long banking relationship can mean a complacent one.
By using an independent commercial finance broker when looking to raise finance will give you a better chance of success. They should know who to deal with at a higher level in all institutions, they can put a lending pack together to go to the lender so less analysis needs undertaking by them and they will then negotiate the best price. Dealing with the bank may still be at the bottom of your list but by using a broker at least it will be at the top of somebody's list that is working for you!
Written by Liam Walker