In a world of high finance there are plenty of opportunities to add the cash required to grow or purchase a new business. And the opportunities exist too at small business level although the big four banks (ANZ, Commonwealth, NAB and Westpac) are the main sources of funding for franchisees.

An advantage of following the obvious route through the banking halls is that all have approved franchises for whom they offer a substantial loan.

For instance, the popular casual restaurant NandoÍs franchising model has been approved by several of the major lending institutions and funding can be secured through these channels, indicates Justin Monaghan, national marketing manager.

James Brouillard at Howards Storage World retail franchise says the company has approved lenders for franchise financing with Westpac, Bankwest and ANZ.

ñMost banks will loan up to 50 per cent of the franchise purchase cost against the business model itself for a greenfield site and up to 70 per cent for an existing site greater than two years. Financing is not guaranteed as the potential franchisee must still be looked at by the bank as credit worthy, but as far as buying a HSW store there are no delays as we submit all our financials, disclosure documents and franchise agreement to them every year for their review.î

The bank is effectively using the brand name as your financial security for the loan. ItÍs the easiest way to meet the financial shortfall, so choosing a franchise with at least one approved lender will smooth the journey.

ñIf you donÍt have any cash, you couldnÍt fund the purchase. If the franchisor is not on the panels, itÍs notoriously hard to get approved,î warns Dallas Foster, a director of City Pacific Finance.

Brokers are an option for finance sourcing, and they may take away some of the strain of sorting through the various deals on offer, though these offers will come from the four banks mentioned along with BankWest, says Foster.

Considerations will include the term of the loan _ usually allied to the length of the agreement, whether or not there are options to renew the agreement, and whether or not an interest only loan that minimises early payments is appropriate.

That franchisors now are on lenders panels effectively replaces vendor finance, says Foster, though some franchisors keen to get an exceptional franchisee on board may still consider waiving some fees.

Kevin BujeraÍs company, Franchise Selection, matches potential franchisees to franchise systems such as The Coffee Club, Darriwill Farm, GrillÍd and Matchbox. In his experience, most franchisors donÍt offer vendor financing. ñIt used to be a big thing,î he says ñbut now finance is a lot more accessible through banks. I think weÍve been a bit fortunate, over the last five years, franchising has been strong and growing. This has offered people more choice of franchises and greater access to finance _ thereÍs something they can afford.î

He believes potential franchisees are now looking past the high interest rates, increasing living costs and are serious about owning a business. ñThose who are genuinely still enquiring are fairly serious prospects,î he says.

And this leads franchisors to also think that if a prospect cannot correctly fund their business, they are probably the wrong people. ñIf the market worsens, the franchisees will feel it easier to justify late payment or non-payment to the franchisor, if they have helped fund them, than to the banks,î he believes.

ñFranchisors have got a little tougher, some have been burnt,î he opines.

Jason Kirkwood financed his first business venture, Matchbox, DFO Southern Cross Station, through B Capital Finance Brokers. So when it came to look at a second Matchbox store in Torquay he turned to the same company, which prepared a professional finance application for the bank, leveraging off KirkwoodÍs first business and laying the foundations for financing further expansion in the future.

ñB Capital has proven experience in arranging franchise finance. It was without hesitation that I engaged them again to arrange further financing for my new store. They were able to put together a finance application that ensured I got the finance I was after,î says Kirkwood.

With a tightening economic environment, are there changes being made to the loans served up by the finance providers? Speaking for one of the big four, NAB, national franchise manager Barry Thatcher says the institutionÍs position has never been as the most aggressive, nor the most conservative, lender.

ñWe never over-commit people to loans,î he says, ñso for us itÍs business as usual.î

Increasingly the bank is seeing stand-alone business pricing as the norm for funding franchise purchases, rather than a reliance on residential property as a security, and he believes that this is a good development for the franchising industry.

Standard, stand-alone business loans are just that, standard. ItÍs a different story if there is substantial security thrown into the mix, and a greater flexibility can be engineered in these cases.

Above all, says Thatcher, applying good business principles is the best way to ensure the best financial arrangement.

ñMake sure you really love the brand and can envisage yourself working with it day-in and day -out, for seven years.î But he cautions against too romantic a view of the brand you buy into. After all, this is a business proposition.

ñEnsure you will get the return on investment that youÍre after,î he advises. ñAsk a few more questions of the franchisor to check that they are financially sound.în