How franchise finance works
Buying a franchise usually involves an upfront franchise fee plus set-up costs such as premises, equipment and stock. Some banks have specialist franchise teams and may lend more readily for well-established brands with a track record.
Lenders usually expect you to put in some of your own money and will look at your business plan and the franchisor's figures.
Worked example
Borrowing £80,000 at 8% over 7 years costs £1,246.90 a month, £104,739.36 in total.
Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
Ongoing costs
Most franchises charge ongoing fees, such as a percentage of turnover. Make sure your forecasts cover these as well as the loan repayments.
Inputs for the franchise business loan calculator
Amount to borrow
The amount you need to borrow for the franchise fee and set-up costs.
Interest rate (per year)
The annual interest rate on your loan. The rate shown is only an example, so enter the rate from your quote.
Term
How many years you'll repay over.
CALCULATOR QUESTIONS
Franchise business loan calculator questions
Will a bank lend to buy a franchise?
Many do, especially for established franchise brands. They'll want your business plan and some of your own investment.
What costs does a franchise loan cover?
Typically the franchise fee and set-up costs such as fit-out, equipment and initial stock.
Are there ongoing fees?
Usually. Many franchisors charge a percentage of turnover or a fixed management fee.
Does this include fees?
No. Add any arrangement fees from your loan offer.