Need help to get the banks on side when you are seeking funding for a franchise purchase? Here are some top tips from Maria Robinson, a banking and franchise executive.

You have found the perfect franchise system in an industry you love, you have conducted your due diligence, developed a business plan and cash flow, and have been approved for the franchise system of your dreams.

You think the hardest part is behind you. But you now need to set up your company, obtain finance and sign the franchise agreement. It seems simple – until you speak to your lender.

Your lender starts talking about serviceability, LVR, your experience in the industry, franchise terms, lease terms, amortisation, projections, benchmarking … your head starts to spin. The good news is that you don’t need to worry about all these technicalities. Feel free to ask them to speak in plain English and leave out the jargon. They won’t be offended, it is a polite reminder for them that not everyone is familiar with lending terminology.

There are some basics every lender will want to know. Here is a list of what you will need to hand to them…

• Your business plan, even if your franchisor did not require you to develop one. Do a business plan anyway, for your own due diligence and for your lender. The business plan outlines how you intend to run and grow your business.

• Your cash flow projections. These are imperative as they indicate how much it will cost to run the business as you describe in the business plan. Cash flow projections will also tell you how much capital you need for setup and running costs, tell you when you will break even, tell you when you will be able to repay the investment capital, and set out your monthly cash position. The figures will also show your lender how much you intend to pay yourself as a salary.

• Your resume. Your lender will want to know what experience you have had in running a business, your industry experience and your skills. A resume is the easiest way to provide this information.

• Your household assets, liabilities, expenses and other income. The lender will want to know the full financial situation of your proposed business as well as of your household. If you have other business or investment interests, provide full information on these as well.

• If you are buying an existing business, you will generally need two years of trading figures and financial statements for the business.

• Details of any security or collateral you may be able to offer, such as property, can help secure the loan.

• Have all your franchise documentation ready, preferably in soft copy. The lender will need to review the franchise agreement, the lease and other documentation, whether it is an accredited franchise system or not.

Your lender will collect additional information about you such as an ASIC search and a credit history report. If you are aware of any issues regarding your ASIC or credit history such as defaults, liquidators being appointed for previous businesses and so on, it is important to

How to present yourself to the bank

How you present yourself is also important. Here are some pointers on good preparation and presentation…

• Complete application forms in full – do not leave out any information.

• Have supporting documents ready to give to your lender as evidence of all the information you have provided in your application form, including bank statements, payslips and rates notices.

• Ensure there is no conflict between the information in your application form and supporting documents.

• Answer openly and honestly any questions your lender asks. Remember you want to borrow money, and if you appear hesitant about providing information or documentation your lender will have concerns that you are trying to hide something.

The individual you are dealing with at your lending institution is generally not the person who will approve your loan. If you can make their life easier, they will be able to better represent you to the credit team that makes the approval.

What do banks love…and hate?

You need to take into account several things that lenders love and hate…

Lenders love it when:

• You invite your banker to contact your accountant directly

• You provide all required paperwork quickly

• You are organised

• It is clear you know what you are doing (for example, you understand your corporate structure, you know who will be a guarantor to the franchise agreement, and you understand your franchise terms).

Lenders do not like it when:

• They need to chase you for information

• You provide conflicting information

• You appear to not understand what you are getting into

• You are not open about your personal and business details

How smoothly your loan application progresses will be impacted by how organised you are, the quality of information and documentation you provide and your level of understanding of the business you are buying.

If you feel that you are doing everything right but you are receiving poor service, ask to speak to the manager of the lending institution.