Australia’s big four banks are believed to have stopped lending to new and existing 7-Eleven franchisees amid the worker exploitation scandal that has forced the convenience store franchise into damage control.
A reported lending freeze imposed by ANZ is expected to have an impact on the sale process for 78 stores that are up for sale.
According to a Fairfax Media report the freeze has made it nearly impossible for any prospective franchisees to get finance. Even existing franchisees looking to expand into new stores are expected to struggle to obtain finance.
Westpac and National Australia Bank (NAB) were contacted for comment but no response was received prior to publication. Commonwealth Bank declined to comment on the issue.
However franchise business intelligence firm FRANdata’s CEO Darryn McAuliffe said “Banks are constantly reviewing their exposures to individual franchise brands and the broader franchise sector. They may well enter a period of closer monitoring where they become more selective with their approvals for the accredited brand rather than a formal withdrawal of accreditation.
“In practice this means only the stronger applicants may obtain approval as they pass on transactions perceived to represent a higher risk.”
So what can franchise buyers do to source funding?
McAuliffe said that if banks impose a lending freeze then franchise buyers are somewhat confined to borrowing against their personal assets, but not entirely.
“If accreditation gets withdrawn or suspended, then franchise buyers generally have no choice but to borrow against their personal assets or turn to non-traditional funding sources.”
While common thought would lead to believing that big, notable franchise brands rely on banks for lending accreditation McAuliffe said that it’s not always the case. In fact, bank accreditation is only enjoyed by a very small number of franchise brands.
“Whilst a bank accreditation can deliver significant benefits from a consistency and time perspective they are still only enjoyed by a small minority of franchise brands. We are now seeing a growing number of brands that have taken greater control of the finance piece by creating their own lender tools that help promote better finance access across multiple lenders,” McAuliffe said.
- Need to get finance? Find out How to finance your franchise and read our guide to Finding finance for your franchise purchase