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THINGS TO CONSIDER WHEN BUYING A FRANCHISE

Deciding to take on a franchise is a big commitment with a number of keys factors to consider. So what should a new franchisee be looking for? My first point would be to look for franchises that are part of the British Franchise Association (bfa). To become a member, a franchisor has to go through an accreditation process – so you can be reassured that you are dealing with a reputable business. You can check membership on the bfa website.Make sure you shop around and don’t just speak to just one franchisor – no matter how much you like the business. Compare them to other, similar franchises or those with a similar cost set-up to make sure you’re making the right selection for you.

Take advice from family members. Will they support you as the business starts, takes off and through any challenging times that might arise? Also, make sure you consult other professionals, such as a lawyer to check the agreement and an accountant to check the numbers.It is also good to ask the franchisor for a full list of their franchisees and speak to those that have recently started up (speaking to other franchisees in your area could lead to joint marketing opportunities) as well as franchisees who have operated for a while. A tip here would be to ensure you have a list of all franchisees so you can have a truly representative picture.

Pros and Cons of Franchise Financing :- 

While many types of new businesses, particularly startups, can have a hard time getting business loans, lenders can be a little more flexible when it comes to giving loans being used for franchises. Since franchises have a lower risk of failure, some lenders can be more flexible about approving loans being used for them.

Your odds of getting a loan for your franchise largely depends on the quality of the franchise. Loans for larger, well-known franchises are more likely to be approved while smaller, newer ones may be more difficult. However, large franchises with national or international name recognition are extremely expensive to get involved with.

Many types of franchise loans require collateral, but in many cases, things like your franchise’s location and equipment can help fulfill that need. However, there are some circumstances where a lender could ask an applicant to provide additional collateral.

Although lenders may be more willing to approve a loan for a franchise, that doesn’t necessarily mean franchise loans are easy to get. Many lenders put a lot of emphasis on an applicant’s credit score. In many cases, lenders won’t approve a loan to someone with a credit score below 650. Even if you have good credit, you’ll also need to be able to make a sizeable down payment. Most lenders will expect you to make a downpayment of at least 20%.


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