When you’re planning a new business venture, you want more than just a bank account, it’s about creating strong, supportive relationships. For many, one of the biggest hurdles is approaching the bank for finance. You will need to research your chosen franchise thoroughly, making sure that it is the right one for you and that you are fully aware of what is involved.

The following outlines HSBC’s basic approach to assessing a request for finance and should provide a useful insight and make that first call with your bank an easier experience.

Potential franchisees are likely to be considered more favourably for finance than a conventional start. For an established franchise, most of the major banks will lend up to 70% of the start up costs, for new franchises the figure will probably be around 50%.

With this in mind you should approach your bank having considered or prepared the following:

PERSON - Who are we lending the money to?
We carry out a full review of your background and reliability; your training, qualifications, track record; financial resources and suitability to run the business. A Franchisor will also look at this to ensure that you are a suitable franchisee.

AMOUNT
How much will you be able to borrow? Prepare a full list of your personal expenditure: mortgage, hire purchase, household bills, etc. This will show how much money you will need to take out of the business in order to live.

REPAYMENT
It is not in our interests - or yours - to lend you money unless we think that you can repay it and we will therefore ask a number of questions on this subject. Will repayment come from, future trading profits after allowing for all your other financial commitments or from the sale of an asset? Does the cash flow forecast show that you can afford to repay the loan? What assumptions have been made in the cash flow forecast? What level of sales are needed to break-even and is it achievable? Is there a contingency plan for any setbacks?

SECURITY
What security can you give to back up your loan? You may have equity in your home. We always recommend that you take independent advice from your solicitor before you provide security. If no security is available, please contact the team on the number below.

BUSINESS PLAN
You will need to prepare a comprehensive business plan and cashflow forecasts for the first two years of the business, together with financial forecasts to support your request for finance. This is a vital document to obtain finance from the bank. Your franchisor will probably help with this, but you need to ensure that you understand the figures and ‘own’ the business plan.

We understand that every franchise is different, with different visions, ideas, success and direction – therefore we provide a range of business services tailored for franchise owners. Our experienced lending managers can make fast, effective decisions, helping you to establish your business.

For tools, checklists and practical information to help you and your business, visit our knowledge centre, or contact us for a free copy of HSBC’s comprehensive guide to starting a franchise, call 0121 455 3438 or email franchiseunit@hsbc.com