As the economy continues to dominate the headlines and finance becomes less accessible, some people may think this is not the time to try and raise finance for business, but they would be wrong, says Tom Endean, marketing manager at the British Franchise Association (bfa).

He said: “For many people it may be the case, but if that finance is being raised for something that has a sound history of security, then the situation changes, and this is where franchising can really stand out from other business start-ups.”

There are several ways of raising finance in order to start a franchise. A lot of prospective franchisees are fortunate enough to already have savings they can use, while others may come into an inheritance or have received a redundancy package.

Some may even be able to borrow from family or friends. However, many will need to consider borrowing from the bank.

Banks, like any other business, need to be investing wisely, and franchising generally presents a much lower risk than other business start-ups. For well established franchises, the banks will usually lend up to 70 per cent of the costs, with the franchisee finding the remaining 30 per cent from their own resources.

With newer franchises in the early stages of expansion, the banks may offer to lend a smaller percentage of the set up costs.

In order to work out how much you need to borrow, you need to calculate the total investment costs, which include any fixed capital and working capital that you will need while you get your new franchise up and running.

It is also worth speaking to the franchisor, as many of them already have a relationship with a bank and can help point you in the right direction. This could not only save you a lot of time, but may also provide you with a better rate.

One point to consider is that, although all major banks have the ability to provide finance, only a select few have specialist franchise teams.

 “At the bfa we only accredit three of the major banks, which we have established relationships with and which we know have the specialist knowledge and appreciation of the financial requirements of franchising,” explained Mr Endean.

“Finance may be difficult to secure at the moment, but franchising provides one of the better platforms to gain it. Not only do the franchisors have relationships with the banks, but the banks that specialise in franchising still see it, in general terms, as a good investment option,” he added.

For more information on franchising and raising finance visit www.thebfa.org