Franchise Finance helps business owners or startups to get funding support to open a new franchise of an established and renowned brand or product. This makes revenue generation considerably easier as compared to starting any new product(s).
Franchise Financing, as the term suggests is the amount of funding required to start a franchise business. Franchising is a contractual relationship wherein franchisee is entitled to use the brand name, image, trade identity and procedures of another business to start an enterprise. This feature allows the business owner to start a new company without building up his/her own brand, products or trade identity. Franchisees are basically co-partnership engaged in mutual benefits.
Identifying the apt franchise could be a painstaking task but after that you are also required to raise required capital. Franchise Finance being a relatively new financial facility, several leading banks and NBFCs have emerged as showing interest in offering franchise business loans.
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Features of Franchise Finance
- Interest Rate, Loan amount and repayment tenure will vary from lender to lender and shall depend on applicant’s profile and his/her business requirements
- Franchise Financing majorly consists of various options, such as traditional loans, small business loans and term loans
- Franchiser sells the right of its business name, brand and products to franchisee for mutual benefits
- The franchise agreement is for a certain time duration that varies from one franchise to another
- Fee to start a franchise business is equivalent of starting any other business
The loan amount offered under this financial facility depends on the size and volume of franchise offering franchisee
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Eligibility Criteria of Franchise Finance
- Age Criteria: Min. 21 years and Max. 65 years
- Business Vintage: Minimum 1 year
- Annual Turnover: Depends on lender
Documents Required of Franchise Finance
- Business Plan
- Duly filled application form
- Passport-sized Photographs
- Identity, Age, Address, Income Proofs
- Personal, business and partner’s KYC
- Last 6 months’ bank statement
- Last 1 year ITR and Sales Tax copies
- Any other document required by the lender
Other Loan Products that can be used as Franchise Finance
Leading Franchises Globally
Some of the leading examples of franchise businesses include McDonald’s, KFC, Marriott International, Pizza Hut, Subway, Burger King, Domino’s, Dunkin’, Hilton Hotels and Resorts, 7-Eleven, Wendy’s, Taco Bell, Intercontinental Hotels, Baskin-Robbins, Hertz, Choice Hotels, etc.
Things to Consider:
Investors or borrowers should be clear on the fact that franchise cost is separate and does not include the operational or working capital required to be invested in the business. Therefore, it is recommended to manage the cash flow to avoid cash crunch situations.
Check and compare from available franchise finance deals offered by various banks and NBFCs. Applicants can get the required information to further proceed the loan application process with the desired lender, as per your loan deal selection and business requirements.