Franchise Finance in Australia

Franchise Finance Tips for New Small Business Entrepreneurs in Australia

Venturing into the world of franchises can be an exciting and rewarding opportunity for small business entrepreneurs. However, understanding the financial aspects is crucial for ensuring long-term success. Below, we’ll guide you through essential finance tips tailored for those new to franchising in Australia.

1. Understand Initial Costs

Starting a franchise involves various upfront costs that you need to be aware of:

• Franchise Fees: The initial fee paid to the franchisor for the right to operate the franchise.
• Setup Costs: Expenses related to setting up your franchise location, such as leasing, equipment, and initial inventory.
• Legal and Accounting Fees: Costs for professional advice to help you understand the franchise agreement and set up your business structure.

2. Secure Adequate Funding

Explore different funding options to ensure you have enough capital to cover initial and ongoing expenses:

• Bank Loans: Many Australian banks offer loans specifically designed for franchisees. Research different options to find favorable terms.
• Government Grants and Programs: Look for grants and financial assistance programs available for small businesses and franchises in Australia.
• Personal Savings and Investments: Consider using personal savings or seeking investment from friends and family to supplement your funding.

3. Budget for Ongoing Expenses

Once your franchise is up and running, it’s important to budget for ongoing costs:

• Royalties and Marketing Fees: Regular payments to the franchisor, often a percentage of your revenue.
• Operational Costs: Expenses related to day-to-day operations, including salaries, utilities, and supplies.
• Maintenance and Upgrades: Budget for maintaining your equipment and making necessary upgrades to stay compliant with franchisor standards.

4. Manage Cash Flow

Effective cash flow management is vital for the health of your franchise:

• Track Income and Expenses: Use accounting software to monitor your financial transactions and maintain accurate records.
• Maintain a Reserve Fund: Set aside funds to cover unexpected expenses or downturns in business.
• Invoice Promptly: Ensure timely invoicing and follow up on overdue payments to keep cash flowing smoothly.

5. Monitor Financial Performance

Regularly review your financial performance to make informed decisions:

• Profit and Loss Statements: Analyze your P&L statements to understand your revenue, costs, and profit margins.
• Key Performance Indicators (KPIs): Track KPIs such as sales growth, customer acquisition costs, and average transaction value to gauge the success of your franchise.
• Benchmarking: Compare your performance with other franchises in the same network to identify areas for improvement.

6. Seek Professional Advice

Don’t hesitate to seek advice from financial professionals:

• Accountants: An accountant can help you with tax planning, financial analysis, and compliance with Australian regulations.
• Business Advisors: Franchise consultants and business advisors can provide valuable insights into optimizing your operations and finances.
• Legal Experts: Consult with a lawyer to ensure you fully understand your franchise agreement and protect your interests.

How Refinance Mortgage Broker Helps in Franchise Finance in Australia?

Our advanced accreditation model and extensive network of franchisor relationships make financing easy and stress-free for both Franchisees and Franchisors.

Whether you’re a new franchisee taking your first steps, an experienced owner looking to expand your territory, or a Franchisor seeking to support network growth,

At Loans and Mortgages our Lending Specialists have many years of experience in securing competitive franchise funding. We have strong relationships with numerous financial institutions and banks, helping to make the dream of owning your own business a reality. Our experienced Lending Specialists know what lenders are looking for and can craft the best submissions to maximize your chances of approval. Loans and Mortgages can assist in obtaining finance for new or existing business franchises in the following ways:

How can I finance a franchise?

Secured Business Loan

A secured business loan requires you to provide something as collateral. Often, franchise loans use personal homes as security. If the borrower cannot make payments, the lender can seize the home to absolve the debt.

If the borrower is unable to make payments on their franchise loan, the lender can seize their home to settle the debt.

Secured business loans are nice because you can borrow a lot of money with a high loan-to-value ratio depending on what you’ve put up as collateral.

Secured business loans often have lower interest rates because they are less risky than unsecured loans.

Unsecured Business Loan

In Australia, unsecured franchise loans do not require collateral. This means that the loan amount is  usually lower, the interest rate is higher, and the repayment terms are restricted, depending on your approval. This option is suitable if you do not have assets as collateral or do not want to risk your assets. Although unsecured loans are more difficult to obtain and have higher interest rates, they may be the right choice in some cases.

Low-Doc Business Loan

A Low-Doc loan is a type of franchise financing that doesn’t require traditional proof of income. If you don’t meet standard funding criteria, this might be the right option for you. Those who run small businesses, work on tips, or have gig jobs might be eligible for a Low-Doc franchise loan.

Business Line of Credit

A business line of credit allows you to borrow funds as needed over time instead of receiving a lump sum upfront. This provides ongoing capital for your business, giving you the flexibility to access money when required.

Bank Indemnity/Guarantees for Leases

Most franchises located in leased premises require a bank guarantee or security deposit to secure and support the lease agreement. Loans and mortgages can provide you with the appropriate bank security from your landlord. Franchise financing can be a tricky business. At Philips Group, our consultants have experience in obtaining franchise financing. We know what lenders are looking for, we know how to present your loan application in order to maximize your chance of approval. We have strong business relationships with a number of financial institutions and banks that can help you take the next step to own your franchise, Call us to find out more on 040 380 3470