Frequently Asked Questions

Experts from the finance and banking industry share their knowledge and experience to answer some of the most common questions asked when securing franchise funding.

What sort of interest rates can I expect?

Our interest rates are individually negotiated and are dependent on the amount you wish to borrow, over what length of time and the security you have available. Funding will be tailored to the length of the franchise agreement and our local Business Managers will work with you to provide a financial package to meet your needs.

Franchising is a less risky way of starting a business so it is likely that interest rates for a franchise owner of an established franchise would be lower than those for a standalone business.

Cathryn Hayes (pictured right, top), Head of Franchising, HSBC

What criteria do lenders look for when financing franchise businesses?

Essentially there are two areas that we look at. Firstly, we assess the franchisor on an ongoing basis and determine what level of support we should provide to their franchise owners. For most franchisors this will be up to 70 per cent of the total set up costs.

Then we look at the individual franchise owner, as for successful concepts where they have failures will be down to the individual. One of the most important aspects of this is that we look to see if the profits generated from the franchise will be sufficient for them to pay for their personal drawing requirements. The key document in our assessment will be the franchise owner’s business plan.

Mark Scott (pictured right, centre), Director of Franchise Development, NatWest

Do I have to use any assets, such as my home, to secure a franchise loan?

The decision of whether you need to use your personal assets to secure any finance depends on the amount you are looking to borrow and the strength of the business plan. Generally for finance amounts above £10,000 the bank would be considering whether security would be required. If you do not have sufficient personal assets to offer the bank then the Government-backed Enterprise Finance Guarantee scheme could be an option. Speak to the bank’s franchise team to find out more about your eligibility to use this scheme.

Richard Holden (pictured right, bottom) Head of Franchising Lloyds TSB Commercial