Franchise Loans in Australia
Navigate Your Franchise Journey with Our Customised Franchise Loans in Australia
Welcome to our unique offering of Franchise Loans, designed to support your entrepreneurial dreams in Australia. We’re here to back your franchise venture with our unique features:
No Doc Low Doc
No Postcode Restrictions
Lowest Rates Guaranteed
Fast Approvals and Settlements
Navigating the Franchise Landscape in Australia
In the competitive world of franchising, having the proper financial support can make all the difference. Our franchise loans are designed to give you the financial backing to establish your franchise, purchase necessary equipment, cover operational costs, or expand your franchise network.
We believe in the potential of every entrepreneur and understand that conventional financing routes may only sometimes be the best fit for your franchise ambitions. That’s why we’ve made our franchise loans accessible, with a No Doc Low Doc option and a credit-friendly approach.
Table of Contents
- Preferred Franchise Types
- Franchise Loan Mechanics
- Loan Terms and Features
- Critical features of franchise loans include
- Loan Approval Process
- Accepted Franchise Systems
- Tips for Buying a Franchise System
- Steps in Buying a Franchise
- Our Commitment
- The real-life success story
- How to Apply
For an existing store, you can borrow 50-70% of the business value; for a new store or business like Ultra Tune, you can borrow up to 65%. However, if you use an existing residential property as security for the franchise loan, you may be eligible to borrow up to 100% of the purchase price. We can assist you in refinancing your home loan to obtain a lower interest rate while securing the franchise loan.
The maximum loan-to-value ratio (LVR) for the business’s value depends on the franchise system’s strength.
Preferred Franchise Types:
Banks prefer franchise systems established for several years, such as Domino or Outback Jack’s. These franchises are considered stable models that have been refined over time. The lenders rely on each franchise store’s significant average turnover statistics as a measure of stability.
The same performance indicators banks consider for non-franchise or independent businesses also affect the loan amount. These indicators include the time the business has been operating and whether the past 2-3 years of business financials demonstrate a steady profit increase.
Franchise Loan Mechanics:
Franchise loans operate similarly to standard business loans, with comparable features and commercial interest rates. However, franchise loans generally allow for a higher borrowing than purchasing a similar-sized non-franchise business in the same industry.
The significant difference is that franchise loans are typically secured against the value of the specific store, outlet, or restaurant you intend to purchase from the franchisor. The bank determines the market value of the franchise through its valuation, independent of the franchisor’s assessment. The loan covers franchise fees, training costs, stock, and business assets. However, you must still demonstrate sufficient working capital to initiate and sustain the business during challenging times.
Loan Terms and Features:
A franchise loan differs from a standard business or commercial property loan in terms of the loan term. The loan term is tied to the length of the lease or franchise agreement term. Lease terms for franchises are generally shorter, resulting in few differences in available features.
Critical features of Franchise Loans include:
1. Loan term: Typically ranging from 5-10 years based on the agreement signed with the franchisor.
2. Loan term with the property as security: 25 to 30 years (standard loan term).
3. Interest-only: Usually around two years or longer if using the property as security.
4. Low documentation options and bad credit options are not available.
Loan Approval Process:
To qualify for a franchise loan, the franchise must be on the approved list of one of our lenders. In addition, you will need to meet a few more requirements. For an existing store, the bank will review the last 2-3 years of financials for the current franchisees, including business tax returns, profit and loss statements, and business bank statements.
An interest cover requirement typically measures how often the yearly earnings before interest, tax, depreciation, and amortization (EBITDA) can service or cover the interest component of the desired loan amount.
For new stores without historical financial information, the bank will rely more on your business plan, including cash flow forecasts and details of your working capital injection and resources, to run a viable store. Even for existing stores, the bank generally expects a business plan.
Experience in a similar-sized venture within the same industry is crucial for favourably presenting a franchise loan application. For example, suppose you wish to buy a Bakers Delight franchise. In that case, the typical requirement is having 3-5 years of experience in a managerial role in a bakery or food service/sales capacity. Lack of experience may raise concerns regarding your ability to manage the business and staff effectively.
Accepted Franchise Systems:
We can help you get approved for franchise loans from various franchises, including but not limited to:
– The Athlete’s Foot
– Auto Masters
– Bakers Delight
– Domino’s Pizza
– Hog’s Breath Cafe
– Muffin Break
– Boost Juice
– Australia Post
– Red Rooster
– Betta Electrical
– Gloria Jean’s
– Fernwood Fitness
Tips for Buying a Franchise System:
To ensure a successful purchase of a franchise system, consider the following tips:
– Assess whether your skills and experience align with the franchise you want to buy.
– Thoroughly read the franchise agreement to understand the terms and conditions.
– Consider taking a franchise course to understand better running a business within a franchise system.
– Speak with previous franchisees to gain insights and mentorship.
– Seek financial and legal advice to assess your financial capacity and understand the franchise agreement.
– Complete due diligence by checking the financial information of existing franchisees, examining the lease agreement, evaluating fixtures and fittings, and involving a solicitor in the contract of sale.
Steps in Buying a Franchise:
The steps involved in buying a franchise system vary depending on the specific franchise. Generally, you would conduct due diligence, review financial information, assess lease agreements, inspect fixtures and fittings, and engage a solicitor to facilitate the sale. The process is similar to buying a non-franchised small business, and you can seek assistance from our specialist mortgage brokers, who have experience in commercial finance and have worked in the credit departments of central banks and lenders.
At Basic Finance, we strive to provide higher service, better advice, and better home loans. With a vast network of lenders, we offer Australia-wide services to finance properties anywhere in the country. Our expertise lies in securing tough loans, and we have a high success rate in obtaining approvals, even with central banks. Contact us today through our provided contact information to discuss your home loan needs.
1. What is a franchise loan?
A franchise loan is a type of loan that is secured against the value of a specific franchise business. It covers franchise fees, training costs, stock, and business assets.
2. How much can I borrow with a franchise loan?
The amount you can borrow depends on various factors, such as the strength of the franchise system and whether it is an existing or new store. Typically, you can borrow 50-70% of the business value for an existing store or up to 65% for a new one.
3. Can I use my residential property for a franchise loan security?
Yes, if you use your existing residential property as security, you can borrow up to 100% of the purchase price for the franchise.
4. What are the preferred franchise types for banks?
Banks generally prefer franchise systems established for several years with a proven stability and profitability track record. Examples include well-known franchises like Domino’s Pizza or Outback Jack’s.
5. How do franchise loans differ from standard business loans?
Franchise loans work similarly to standard business loans but often allow for a higher borrowing than purchasing a similar-sized non-franchise business. The loan term is tied to the length of the franchise agreement, and the features and interest rates are similar to commercial loans.
6. What are the typical loan terms for franchise loans?
The length of the franchise agreement usually determines the loan term for a franchise loan. It can range from 5-10 years, but if a property secures the loan, the standard loan term of 25-30 years may apply.
7. Are Low documentation or bad credit options available for franchise loans?
There needs to be more documentation and bad credit options for franchise loans. Lenders typically require standard documentation and a good credit history.
8. How can I increase my chances of getting approved for a franchise loan?
To increase your chances of approval, ensure that the franchise is on the approved list of lenders and meets the lender’s specific requirements. This may include providing financial statements, demonstrating business profitability, and having relevant experience in a similar industry.
9. Can I buy an existing franchise?
Yes, you can buy an existing franchise. The process involves:
- Conducting due diligence.
- Reviewing the financial information of the franchisee.
- Assessing the lease agreement.
- Ensuring the premises are ready for trade.
10. What should I consider before buying a franchise system?
Before buying a franchise system, consider factors such as your skills and experience aligning with the franchise, carefully reviewing the franchise agreement, speaking with previous franchisees, seeking financial and legal advice, and completing thorough due diligence. Remember, it’s essential to consult with a financial professional or mortgage broker to get personalized advice based on your specific situation and goals.
The real-life success story
Name: Sarah Johnson
Franchise: FitLife Fitness Centers
Sarah Johnson had always been passionate about fitness and wellness. She dreamed of owning her gym and helping others lead healthier lives. However, starting a gym from scratch with significant financial risks seemed daunting.Determined to pursue her dream, Sarah researched franchise opportunities in the fitness industry. After careful consideration, she invested in a franchise called FitLife Fitness Centers, known for its state-of-the-art facilities, comprehensive fitness programs, and strong brand presence.Sarah secured a franchise loan and went through the extensive training provided by the franchisor. She found immense support from the franchise’s corporate team, who guided her through every process step, from site selection to marketing strategies.With her dedication and hard work, Sarah successfully launched her FitLife Fitness Center in a prime location in her community. The franchise’s proven business model and reputation attracted many members. Sarah focused on creating a welcoming and motivating atmosphere, offering personalized training sessions and fitness classes tailored to her clients’ needs.Within two years of operating her FitLife Fitness Center, Sarah recovered her initial investment and achieved substantial profitability. She expanded her team of trainers and introduced additional fitness programs to meet the diverse needs of her members.Sarah’s success extended beyond financial gains. She became an integral part of her community, organizing charity events, partnering with local schools for fitness programs, and supporting wellness initiatives. Her FitLife Fitness Center became a hub for fitness enthusiasts, fostering a sense of community and inspiring individuals to prioritize their health and well-being.Today, Sarah’s FitLife Fitness Center thrives, attracting individuals of all ages and fitness levels. Her success story motivates aspiring entrepreneurs who aspire to make a difference in people’s lives through the franchising model.Sarah’s journey exemplifies how a combination of passion, a solid franchise system, hard work, and a focus on customer satisfaction can lead to remarkable success in franchising.
How to Apply:
To apply for a franchise, follow these simple steps:
1. Research: Conduct thorough research to identify the franchise opportunities that align with your interests, skills, and financial capabilities. Consider factors such as industry, brand reputation, support provided by the franchisor, and potential profitability.
2. Contact the Franchisor: Reach out to the franchisor to express your interest and request more information about their franchise opportunity. They will provide the necessary details, including the application process and requirements.
3. Evaluate the Opportunity: Review the franchise disclosure document (FDD) provided by the franchisor. This document contains important information about the franchise, including financial statements, franchise fees, ongoing costs, and contractual obligations. Seek legal and financial advice to ensure you understand the terms and conditions.
4.Submit Application: Complete the franchise application form provided by the franchisor. This form typically requires personal and financial information, including your background, experience, and investment capability. Attach any supporting documents as requested.
5Interview and Due Diligence: The franchisor may conduct an interview or additional due diligence to assess your suitability as a franchisee. Be prepared to discuss your qualifications, motivations, and business plans.
6.Review Franchise Agreement: If approved, carefully review the franchise agreement, a legally binding contract between you and the franchisor. Seek legal counsel to ensure you fully comprehend the terms and obligations outlined in the agreement.
7.Financing: Determine how you will finance the franchise investment. Explore financing options such as bank loans, Small Business Administration (SBA), or personal savings. Work with financial institutions to secure the necessary funding.
8.Sign the Agreement: Once satisfied with the terms and have secured the required financing, sign the franchise agreement. This legally commits you to the franchise system and grants you the rights and responsibilities as a franchisee.
9.Training and Launch: Participate in the franchisor’s training program to learn the operational aspects of the business. Set up your franchise location, hire and train staff, and prepare for the grand opening.
10.Launch and Grow: Execute your business plan, leveraging the support and resources provided by the franchisor. Follow their proven system, provide excellent customer service, and actively market your franchise to attract customers. Continuously evaluate and adapt your strategies to ensure the growth and success of your franchise.
Franchising offers a proven path to success for aspiring entrepreneurs. With the support of a well-established franchise system, individuals like Sarah Johnson can turn their passion into a thriving business. Through her determination and the power of franchising, Sarah successfully launched and grew her FitLife Fitness Center, becoming a prominent figure in her community while achieving financial stability. Her story exemplifies the potential for extraordinary success that franchising can offer.
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