THE MONEY FEATURE clarify the correct numbers
• Provide the bank with the latest template business plan. If the bank has this in advance of any funding request, any questions can be answered before the proposal arrives
• If you do not provide a template, consider using a third party to undertake this for you, such as Franchise Finance – a bfa member consultancy. The banks already understand their templates and meet regularly to ensure it is in line with current bank requirements
• Consider undertaking your own credit checks, thus not wasting any further time on a franchisee that has adverse credit information
• Provide regular trading information on franchisees to the bank
• Provide information on recent new franchisees – the franchise may well have improved as it matures so recent fi gures may be more useful than the average of all new franchisees in a long-standing franchise
• Ensure the franchisee understands their plan and can answer any questions posed by the bank manager
• Be familiar with the bank forms used and guide franchisees on their completion – you may even consider using a version for your own use in obtaining fi nancial information on a franchisee
• Review the franchisee’s plan before it is received by the bank and if there is anything unusual about this one let the bank franchise team know in advance
• Keep in regular contact with the bank’s franchise team so that you are aware of any process changes that could impact on your franchisees obtaining their fi nance in a timely way
“Outside of bank lending services, other forms of finance are making headlines such as crowd- funding and peer-to-peer”
fi nancial health and that of your franchisees.
• Revisit your own business plan – a well- produced, regularly updated business plan can keep you focused on your development strategy and key business goals. And while you’re at it, why not revamp your marketing plan?
their cashfl ow and business plan. This is an area where franchisors need to help, support and develop their network, enabling them to grow their business and build an asset – which also benefi ts you, the franchisor. So what are some of the ways you can do that? Here are a few areas to focus on:
M
Planning is essential – a robust business plan can help to keep a business on track and ensure that franchisees know which areas to focus on to keep their businesses healthy.
As well as monitoring your franchisees’ business plans, try to ensure that they are working well with their bank. These are typical problem areas – things that can lead to a breakdown in the relationship:
• Not supplying agreed information on time • Failing to make loan repayments • Repeatedly exceeding overdraft limits • Unexpected or ongoing trading at a loss • Not using facilities for the agreed purpose (such as personal expenditure)
Remember to look at your own requirements as a franchisor, too. The UK has a wide range of franchisors, from fairly small businesses setting out on the franchise route to major corporates. Regardless of size, it is important to:
• Have a clear view of where the business is going – what are your aims for expansion? How much are you going to need to spend to achieve that?
• Keep good fi nancial records and forecasts. In this way you can apply for new fi nance before you need it urgently. Banks will look more favourably on such requests as it shows you are in control and can plan.
• Understand how fi nancial ratios work. They are good indicators of a business’s health and these are what banks use to assess your
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www.franchisornews.co.uk H
SBC continue to provide fi nance to good quality franchisees, assisting them in the launch and growth of their
Andy Brattesani, UK head of franchising, HSBC
any franchisees do not come from a business background, but it is so important that they understand
You may consider alternative methods of funding working capital, like invoice fi nance, which involves raising fi nance using your debtor book. The advantage of this is that cash fl ow is directly linked to business expansion. Another funding method to consider is asset
fi nance to fund the purchase of equipment for the business. This can help ease cash fl ow by spreading repayments over a period of time instead of making a one-off investment.
“It is worth investing time, as a franchisor, to develop a strong relationship with your bank”
Outside bank lending services, crowdfunding and peer-to-peer networks are making the headlines, with a number of platforms like Funding Circle available to you to explore as to whether you can fund your expansion plans or projects.
It is worth investing time to develop a
strong relationship with your bank, making sure they understand your business model and can work with you to develop fi nancial packages tailored to your individual needs and those of your franchisees.
Cathryn Hayes, head of compliance and fi nance, British Franchise Association
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