The amount of investment required for taking up a franchise is always daunting to the aspiring entrepreneurs. Also, getting bank loans nowadays pose a tough challenge. This article is a must read to make this intimidating taAdvisorsk easier.
Taking up a franchise is becoming a popular way to start a business. However, aspiring franchisees are hindered in their journey of success due to financial constraints. With the average investment being in lakhs, some entrepreneurs are able to fund on their own, while for others it might a daunting task. This impediment can be easily overcome by taking loans from banks, money lenders, family, and friends etc. However, considering bank loans is much safer compared to other means. Getting loans from banks nowadays involve series of documentation and compulsions and in few cases, banks do not agree with the proposal and cancel the application of the prospective franchisee.
This article is a must-read for the aspirants as it provides the needed information for acquiring easy bank loans. Below we in list the guideline of preparing a well –made franchise business plan and its importance as a deciding factor for the acceptance or rejection of bank loan.
Before applying for bank loan
Before heading towards any bank with a loan application, the entrepreneurs need to follow certain crucial steps. The first thing to do is to consider the total expenditure as well as the total investment needed. It is essential to know how much investment is affordable in the business, consider savings and the financial help of friends and family also. After considering all this, decide upon the bank loan. Another must-do for an aspiring franchisee is to include the buying cost, setting-up cost as well as the running cost in the initial investment needed. Consider the costs of rent, equipments, furnishing of the outlet before deciding upon the investment needed. Moreover, paying staff, buying stock, expenses of wear and tear on equipment, paying taxes, royalty payments to the franchisor are important points to consider. Franchisors can also provide information regarding the initial and ongoing costs of the franchise. Another important assessment to make before applying for a loan is against what loan can be secured. It can be house, other properties or some other guarantee. Be sure to take the advice of a franchise attorney before providing any security.
After considering these guidelines, the next step is to make a flawless business plan, which the banks find unable to resist.
Franchise business plan
Keeping in mind the above mentioned points, aspiring franchisees will be sure about the amount of money needed to run their franchise comfortably. Now the next step is to approach the bank for the loan. But before approaching the banks, prepare a business plan with all the relevant points to secure a loan. A business plan is a detailed report on everything that is been decided about the business. It includes the type of franchise seeked and the space in the Indian markets for it. Most importantly, it also includes the terms related to returning back the loan with the rate of interest and in how much time.
Preparing a business plan:
Independent versus franchise business
Applying for loan to buy a franchise is comparatively easier than starting a business from scratch. The reason behind it can be the lower failure rate in franchise business as compared with any own business. Banks undoubtedly like to favour established, well-known and reliable franchises. Therefore, an entrepreneur taking a franchise is more likely to receive loans easily than an independent business owner is.
Banks providing easy loans
Applying for business loans has become simpler and easier with the emergence of many national and international private banks. A few banks which help aspiring franchisees to achieve their goals are HDFC, ICICI, IDBI, ING Vysya etc. Many nationalised banks have also realised the profits in providing loans to budding entrepreneurs and thus, have made the loan procedure simpler.
To aptly conclude we can say ‘Where there is a will, there is a way’. Entrepreneurs that are keen to jump into franchising can find a way to do so. As an age old business practice, banks still are the preferred destination for the aspiring franchisees.