Financial advice

Money matters

How to secure financial support for your franchisee network, Richard Holden advises

Financial assistance is readily available to franchisees of well established and proven franchise systems. Franchising remains an attractive sector for the banks, however expect your franchisee's financial requests to be closely scrutinised and possibly challenged by the bank manager.

Here are a few pointers to ensure that your franchisees maximise their potential to secure the financial assistance they are looking for. Firstly ensure your franchisees deal directly with the bank's franchise department. Many prospective franchisees approach their local bank manager and they may have little knowledge of franchising. They are, therefore, unlikely to be best placed to assess your new franchisee's financial proposition.

Speak to the bank's franchise specialists who will ensure that the potential investor is speaking to someone who not only understands franchising, but who has background information about your franchise opportunity. This leads me onto my next top tip. Keep the bank updated with information about your franchise. Don't wait for them to contact you.

Franchises are constantly developing so provide the bank with an update every six months so that you know the bank manager and the bank's credit department, who sanction the lending, are fully up to speed with the latest position with your franchise. By sharing your successes and by being upfront in explaining any franchisee failures, you will be helping your franchisees gain the financial assistance they need from the bank.

When assessing a lending application the bank will be reviewing the trading performance of existing franchisees that bank with them. So ensure that the financial projections your franchisees are presenting to the bank manager reflect the current performance of your network and are not based upon figures that are five years out of date. Include any assumptions used with the forecasts and wherever possible provide evidence to back up that they are realistic and achievable.

Ensure that your franchisee provides the bank with a full breakdown of their assets and liabilities position as well as their personal income and expenditure. These details are often missing from business plans which can delay the processing of the lending application.

The franchisee should send a copy of their business plan to the bank in advance of the scheduled meeting so that the bank manager can prepare for that meeting. Franchisees also need to prepare and it is advisable to practice the delivery of their presentation beforehand. Your franchisee should have a good understanding of both the operational and financial aspects of their plan and be able to answer any questions the bank manager asks confidently.

By keeping the communication lines open with the banks and ensuring that they have the latest information about the franchise and your network's trading performance you are helping your franchisees to secure the financial deal they are looking for. So when was the last time you updated the banks franchise departments? Make it an action point to do so.

Richard Holden is the head of franchising for Lloyds banking Group.