My HMO Journey: No rest for the wicked as we approach...
The bank’s lending assessment
Bank Managers will be considering you as an individual and the skills and knowledge you bring to the business as well as the franchise brand, industry sector trends, competitors, your written business plan and the financial projections to demonstrate your ability to service the financial commitment you are looking to take on. They would also want to understand your own personal financial position and how much you need to draw from the new business to meet your own personal and household expenditure.
The level of finance available from a bank will depend upon the strength of the franchise system and brand as well as the business plan you’ve produced. Typically for well-established and proven franchise brands the bank will consider lending up to 70 per cent of the total set up costs including working capital. For newer, less established franchise systems the amount of finance available maybe lower.
For lending requests in excess of £25,000 the bank will probably require security for the loan which commonly will be a legal charge over a residential property with sufficient equity. Don’t be put off they isn't any security to offer the bank. The Government backed Enterprise Finance Guarantee Scheme maybe available for those who have a strong business proposal, but who lack security that the banks usually require.
Lloyds Banking Group continues to approve 80 per cent of customers’ requests for loans and overdrafts, and we have a range of funding options available, which includes “Lloyds Funding for Lending.” This utilises the Government’s scheme, and enables businesses to benefit from lowered funding costs on loans and offers a one per cent reduction in the interest rate for new business loans for franchisees.
Self-employment can be a daunting prospect for anyone, but hard work, determination and a large amount of common sense will take you a long way towards achieving your business goals. If you set realistic targets and undertake a meticulous planning process, once you have delivered your business plan with confidence and answered all questions knowledgably, you have the basis for a successful relationship with your bank manager as you look to expand into the world of franchising.