How do I finance the purchase of a franchise?
Answered by Rod Young from DC Strategy
Franchising in Australia is in a very favourable position in comparison with independent businesses.
The vast majority of new business start-ups use personal savings and loans from friends and family to finance a new business.
Generally the banks will not finance new business start-ups during their high risk establishment period. As a result most new business start-ups use a first or second mortgage on their home to raise the capital to start a business.
Franchising, however, enjoys a unique space in the small business sector of the big banks, with ANZ, Westpac, CBA, NAB and BankWest all having dedicated franchise teams who are trained specifically in franchise lending.
Many of the established franchise systems (those that have been franchising for 3-5 years and have over 15 franchises) have “approved” status with some or all of these banks, which means that, depending upon the franchise system and which bank, between 20 per cent and 70 per cent of the total establishment cost is finance by the banks and secured by a charge on debenture (a kind of mortgage) over the franchise and its assets.
Always keep in mind that you will need to accumulate some cash and assets from hard work and hard saving to finance you franchise. So stay close to your friends and family to get started.
The vast majority of new business start-ups use personal savings and loans from friends and family to finance a new business.
Generally the banks will not finance new business start-ups during their high risk establishment period. As a result most new business start-ups use a first or second mortgage on their home to raise the capital to start a business.
Franchising, however, enjoys a unique space in the small business sector of the big banks, with ANZ, Westpac, CBA, NAB and BankWest all having dedicated franchise teams who are trained specifically in franchise lending.
Many of the established franchise systems (those that have been franchising for 3-5 years and have over 15 franchises) have “approved” status with some or all of these banks, which means that, depending upon the franchise system and which bank, between 20 per cent and 70 per cent of the total establishment cost is finance by the banks and secured by a charge on debenture (a kind of mortgage) over the franchise and its assets.
Always keep in mind that you will need to accumulate some cash and assets from hard work and hard saving to finance you franchise. So stay close to your friends and family to get started.
About Rod Young
Rod Young is an Executive Director at DC Strategy. DC Strategy is widely recognised as the region’s leading Strategy, Franchising and International consulting group. DCS has developed the networks and brands of many of the region’s most successful businesses.
You should always check independently that an ask an expert answer published on Franchise Business applies to your particular circumstances
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