I want to buy a franchise but I’m worried about how I can get finance. What should I know?

There are a few key points to have in order before approaching a bank for finance.

  • Make sure you have a clear credit record
  • Do your research on the brand and determine how much a unit will cost, how much is required in unencumbered capital (usually 40% to 60%), and how much working capital is typically required
  • Then approach your chosen brand and begin the application process. Banks will only consider financing franchisees who have been approved by the franchisor first. Don’t try skip steps and go straight to the bank
  • If you’ve been approved by your franchisor, carefully run through the numbers they specify for opening a new unit or taking ownership of an existing one. Then prepare a thorough business plan – no cheating, do it yourself – that you can present to the bank. They want assurance that firstly the brand is a successful one, that you have the appropriate skin in the game, and thirdly that you possess the relevant business and financial acumen to make the business a success. Without demonstrating these key qualities, a bank will be reluctant to loan money.
Franchise Zone
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Franchise Zone is published by Entrepreneur Media SA. It offers advice and franchising opportunities in South Africa.

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