Funding an adventure needn’t hold you back
STARTING a franchise business comes with a price tag.
The investment cost quoted by franchises is usually the minimum you need to start. It typically includes the right to use the name, logo and knowhow of the franchisor, training, launch costs and sometimes initial equipment and stock.
You’ll also need working capital to pay your personal and business bills until the business gets into profit.
If you can come up with 30 per cent of the total cost of the franchise yourself, franchisors can often put you in touch with the franchising arms of banks or other funders which will lend you the rest, but shop around for funding sources.
Bear in mind borrowing comes with repayments, which means it can take longer to get into profit.
Samantha Follows, who started a Cafe2U coffee and snacks delivery franchise last June, says: ‘ I had to raise £26,000. Cafe2U said it could help me access funding, but I had a redundancy payment that covered start-up costs and working capital, so repayments do not hit profits.’
Martyn Ward, head of recruitment at Cafe2U, says: ‘We have access to a range of financial products which can be tailored to you. A qualified candidate can get into the Cafe2U franchise with a personal investment of as little as £10,000.’
Paul Hansen, from Franchise Finance, which specialises in helping franchisees find funding, says: ‘There are many sources of funds. We worked with a franchisee who had £60,000 in capital to invest into a motor services supply franchise that required £350,000 in total.
‘We helped them fund the shortfall using business loans from Hitachi, the Government’s Start Up Loans scheme, bank overdrafts, VAT loans and asset finance to fund the leasing of equipment.’
SEE cafe2u.co.uk, franchisefinance.co.uk, startuploans.co.uk and thebfa.org