Financing a Franchise in South Africa
Financing a franchise is easier than financing an independent business. Most commercial banks are comfortable with the franchise mechanism and franchisor support mitigates the bank’s risk to a large extent.
Most banks have a dedicated Franchise division with a focus on franchise financing. Their centralized team have experience and knowledge of the sector. All applications are handled and monitored centrally, while regional relationship managers are appointed to guide the franchisee through the application process.
To qualify for bank finance for a franchise, the prospective franchisee needs between 40 and 50% of the total franchise investment in cash or similar unencumbered funds. The bank can finance the balance if the applicant meets the required criteria. In addition to the own contribution, the franchisee also needs to offer some form of collateral. If no assets are available to offer as security.
The steps to follow to apply for franchise finance are outlined below:
Step 1 – Make contact with the franchisor and obtain provisional approval as potential franchisee.
Step 2 – Ensure that at least 50% of the total investment can be provided by the applicant in cash or similar unencumbered funds.
Step 3 – Complete the bank’s application form and contact them to start the application process.
Most Franchise Toolkit contains everything you need to complete your application. It includes:
- Application for a New Franchise Funding
- Business Plan Guideline Template
- Franchising Cashflow Template
A full list of supporting documents required for the application can be found in the application form from the bank.