Getting finance for a franchise or business is very different from getting a home or car loan. It’s a lot more thorough. Financiers also have a regulatory requirement to ensure you understand the business you’re going into.
ANZ National Franchising & Supermarkets Manager Tony Cotter, who looks after franchise finance Australia-wide for the bank shared his best practice tips and tricks, during his presentation, How to Prepare to Get Bank Finance at the Australian Franchise Expo Online.
He detailed the personal financial information and documentation you’ll need to provide, the Franchise documents required, as well as some insights on things that have changed with the current environment.
A couple of key takeaways from his presentation are:
In terms of business-related documents required Tony mentioned the need to include a Business Plan.
He says, most financiers have templates for a Business Plan on their websites.
They’re not looking for a lengthy document, but do want to know how you intend to run the business, if it’s an existing business any changes or improvements you’re intending on making, and a SWOT analysis to demonstrate you understand the business and the operating environment.
Banks also want to see cash flow and projections, including assumptions. (David Campbell ran an excellent session on this at the Expo, which you won’t want to miss! Log-in now to learn more >)
Key franchise information
Another key takeaway from this session to be aware of was around the information contained in the franchise documents.
You will need to provide the financier with the Franchise Agreement and the Franchise Disclosure Document.
Tony says, while these documents are quite lengthy they include a lot of important information and you need to know what these documents mean and the information they contain. (MorganMac Lawyers Mediator and Consultant Bill Morgan ran a great session on Digesting the Disclosure Document and other key legal documents at the Expo.)
One key point Tony made was that a financier will not fund a business loan longer than the Franchise Agreement term and/or the lease term if your business has a retail space.
You need to make sure that the business loan can be repaid within the initial term, which is something to consider as part of your franchise assessment. This can come as a surprise to some people, so don’t get caught out.
Ensure the person assessing your loan understands franchising
Tony also recommends seeking out a financier or banker that actually understands franchising. He goes into great detail on the information you need to include about the franchise in your application, but in addition to this, it’s wise to ensure the person assessing your application also understands franchising.
Your franchisor may be able to provide some guidance on this. Some franchises also have special relationships with banks.
Giving yourself the best chance
If you follow these, and the other tips Tony offers in his presentation you’ll give yourself the best chance of receiving finance to fund your franchise.