Characteristics of franchisees who fly through funding applications

Franchise Finance has worked with thousands of franchisees from a range of diverse backgrounds. This valuable experience has given the team a great level of insight into the key characteristics of franchisees that prove successful when applying for funding.

Below are five key traits that usually result in franchisees flying through funding applications:

  • The applicant is a home owner
    This does depend on the amount of finance that is required, but the availability of property as security for higher value borrowing is a significant advantage when a risk assessment is being made by an underwriter.
  • The applicant has good business acumen
    A sound understanding of business essentials is a must. Inexperience in the ‘business world’ could potentially put you on the back foot. An understanding of managing a business in a similar sector to the chosen franchise will provide confidence that with dedicated training, development and support from a franchisor, the new business venture will be a success.
  • The applicant is investing in a well-established franchise brand
    Franchise brands with numerous trading units and a strong history of profitable outlets tend to be a bonus when funding is sought by prospective franchisees. Typically, lenders will look to contribute between 50% and 70% of the total franchise start-up costs, including the franchise fee, VAT, professional fees and working capital. The stronger the brand is perceived to be, the more money the lender is likely to sanction.
  • The applicant has significant personal contribution
    The importance of this element is the demonstration of belief in oneself. If you are unwilling or unable to stake considerable money personally, it is a challenge convincing a lender to finance a proposition where the prospective franchisee has no ‘skin in the game’.
  • The applicant has conducted a great deal of research
    Comprehensive due diligence is a vital component of a lending application. Research should cover factors including competition, marketing opportunities and demographics. The ability to understand and convey how a business will be a success is vital for a lender. Would you lend your money to someone who did not know their business model inside out? The chances are you wouldn’t!

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