Franchise businesses are seen as proven successful business model. Some franchises are viewed more favorably than others and can mean that you can borrow more against the business.
You can borrow between 50-70% of the business value of an existing store or up to 65% depending the franchise proposed to be purchased. Using the equity in your property we could lend up to 100% pf the purchase price
Franchise loans like a standard business loan with similar features and commercial interest rates. The biggest difference is that you can borrow more against the business. Which in turn reduces the deposit required to purchase the business.
Franchise loan terms
The loan term is generally tied to the length of lease and franchise agreement term. These features include:
- Loan term: It could be anywhere between 5-10 years depending on the length of the agreement signed with the franchisor and lessor.
- Loan term with property as security: 25 to 30 years (standard loan term).
- Interest only: Around 2 years or more depending if you’re using property as security.
Tips on buying a franchise business
- Assess whether you are suited to the franchise model
- Seek financial and legal advice
- Read the franchise agreement carefully
- Review the financials for the business
- What is the remaining franchise/lease agreement
- Check to see if there are major fit out requirement
- Speak to previous franchisees
- Consider completing a franchise course
- Consider why the owner is selling