“Arrogant”
“Banking crisis”
“Reckless bankers”
These are phrases that have been applied to the Irish banking world even more than usual over the last week. Justified or not, hearing financial institutions presented by politicians and the media in such a way is hardly encouraging, especially when combined with the banks’ reticence to lend to small businesses. The cost to a franchisee for a turnkey solution varies tremendously, but the average price is around €50,000, and many franchisees will have to approach a bank to apply for a startup loan.
There are tactics for the battlefield! Check out the following tips for when you are considering taking on intimidating banks, and persuade them that you are a ‘good risk’:
Get in touch with a bank that is familiar with your industry and your target market, as they will be more comfortable with lending in this area. Your franchisor should be able to point you in the right direction, and they may even have a relationship with a bank already in place.
Inspect the business section of newspapers, as sometimes banks are actively looking to provide offers to small businesses.
- Research different banks and their offers to small businesses. Many UK banks have a special franchise financing department, and if you show up to the meeting with other quotes, your bank may be willing to improve its proposal. A good place to investigate is franchise exhibitions – banks often have stands there.
Approach the bank with a strong, realistic business plan and cash flow forecasts. You must be able to say exactly how much you need, why you need it (equipment, premises, staff) and how you will pay it back, plus have evidence to back this up.
You also need to prove that you understand the franchise inside out. See how much your franchisor will help with your business plan and unless all this is your area of expertise, present your script to a professional writer/business consultant who can polish it.
- Dress well and portray a confident manner at the meeting. Stay professional and be prepared for all sorts of different questions – it helps to have a list of strong facts that you can throw out there as backup whenever you need them.
- You’re probably going to need to show your personal credit history, so make sure you have the correct documentation with you. Banks assume that you will manage your business in the same way that you control your personal finances, and they are less hesitant to provide a business startup loan to an individual they have worked with before. If you have a good personal history with the bank, and owe them no outstanding debts, they may even offer you a lower interest rate.
Happily, while smaller businesses are seen as higher lending risks than larger ones, being part of a franchise with an established track record will be a strong advantage. Franchising is considered a safer road into business than just setting up on your own.