Most franchisees, even those with significant personal savings, will need some form of external finance to fund their franchise investment. Whether you are covering the initial franchise fee, fitting out premises, purchasing equipment, or building a working capital reserve for the first months of trading, the right finance structure can make a significant difference to how your business starts and grows. This guide covers the main franchise finance options available to UK franchisees, and how TFC can help you prepare.
How much do you need to finance?
The starting point for any franchise finance conversation is understanding the total investment required, not just the headline franchise fee. The franchise fee covers the right to trade under the brand and access the franchisor’s system and training. But the total investment includes everything needed to open and operate the business: equipment, premises costs, initial stock, marketing spend, and working capital to carry the business through until it is generating sufficient revenue. On each franchise opportunity listed on this site, the total investment figure is shown alongside the franchise fee. It is the total investment figure, not the franchise fee alone, that should inform how much finance you need to raise.
Finance options for UK franchisees
Start-up Loans Company
The Start-up Loans Company is the first option TFC recommends exploring for franchisees who are starting out or in the early stages of trading. It is a government-backed scheme administered by the British Business Bank, providing personal loans for business purposes at a fixed government-set interest rate. Franchise businesses are explicitly eligible to apply. Each applicant can borrow from £500 to £25,000, and where a business has multiple partners, each can apply individually, taking the total available to the business up to £100,000. The loan is unsecured, repayable over up to five years, with no early repayment charges. The scheme also includes 12 months of free mentoring, a significant benefit for a new franchisee navigating the early months of trading.
Getting a Start-up Loan approved is not simply a matter of completing a form. The application requires a properly structured business plan and cash flow forecast that meet the lender’s specific requirements, and the quality of that documentation plays a major part in whether an application succeeds. TFC recommends working with Gary at BM Finance, a specialist business advisor with nearly 30 years of experience who has worked with over 100 franchisors and their franchisees to secure Start-up Loan funding. Gary and his team get your documentation in order before submission, prepare or review the business plan and cash flow projections to lender standard, and work alongside you as the application goes through the process, making sure you provide the right responses at each stage.
To start the process with BM Finance, complete their short webform here.
High street banks
Barclays, NatWest, and HSBC all have dedicated franchise banking teams with experience in assessing franchise finance applications. Banks generally look more favourably on franchise lending than on standard start-up business loans, because franchises come with a proven business model, an established brand, and franchisor support, all of which reduce the perceived lending risk. A well-prepared franchise finance application has a realistic chance of success at a high street bank, provided the business plan and financial projections are credible and clearly presented.
What the banks will want to see is a solid business plan and cash flow forecast, built around the franchisor’s financial projections and your own assessment of the local market. TFC can help clients produce the documentation lenders expect to see. Direct contacts for the franchise teams at each bank are available via their respective websites.
Portman Asset Finance
For franchisees who need fast, flexible finance, or who have found that bank lending is not straightforward given their circumstances, TFC’s specialist finance partner is Portman Asset Finance. Portman is both a direct lender and a broker with access to over 40 specialist lenders, offering finance from £10,000 to £2,000,000 across lease financing, hire purchase, business loans, and equipment refinance. Portman considers all types of franchise businesses and all credit histories, with approvals sometimes available within hours.
You can enquire directly with Portman via TFC’s referral link, or read full details of their products and the partnership on the Portman Asset Finance page. You can also call Portman on 01604 321995 quoting Franchise Consultant.
What lenders look for
Whichever finance route you pursue, lenders will assess a number of things before approving a franchise loan. The core elements are a clear business plan covering the opportunity, the market, and your background; a detailed cash flow forecast showing how the business will generate revenue and service the debt; evidence of your personal financial position and credit history; and information about the franchise itself, including the franchisor’s track record, the franchise agreement terms, and existing franchisee performance data. Established franchises with a proven network will generally be viewed more favourably than brand new concepts, though both can secure finance with the right preparation.
How TFC can help
TFC works with franchisors on the documentation and materials that support franchisee recruitment, which includes helping to produce the financial projections and business case that prospective franchisees will use when approaching lenders. If you are a TFC client considering franchising your business, your franchisees will be better placed to secure finance if the financial data you provide them is clear, realistic, and lender-ready from the outset.
If you are exploring franchise finance options and would like to talk through your situation, get in touch with the TFC team or book a call with Steve directly.