One of the most important parts of franchising is having the financial ability to start your new business. This is about knowing what costs you will incur, the type of loans you might need to apply to the banks for, whether equipment is needed and leases involved, and, finally, do you need to be VAT registered?

Here’s a breakdown of some of the key terminology you’ll hear and what it means for you:

Liquid cash

When a franchise business first advertises its brand, there will normally be an amount of money or ‘initial investment’ associated with starting the business. More often than not, this will be the sum of money you need to have in your bank account as ‘cash’ already available to spend at the point of applying for the franchise.

Bank loans

When considering a property-based franchise the real question is: ‘What is the full cost to open a fully working business?’. Your own cash position may mean you can only open your business with additional financial investment. That does not mean you need to have all of the cash yourself to get started, in fact, it is very common for prospective franchisees to approach a high street lender who specialises in franchising e.g. Natwest, HSBC, Lloyds, Barclays to name a few all of whom lend millions to the industry each year. These lenders look very favourably at franchise businesses whom they will have previously vetted to understand the business and will normally offer ‘match funding’ (matching how much cash you have available yourself to invest) for the first franchise and increase the funding available for multi-unit owners. Banks will always look for personal guarantees to business loans and, excluding the current situation with COVID-19, will utilise the Enterprise Finance Guarantee (EFG) - a government backed ‘insurance policy’ to protect 70% of the loan amount for the bank. *

*This does not take away the liability completely, but you pay a 2% per year interest rate for the guarantee.

VAT

Everything involved with your franchise business will incur VAT charges. At the beginning (as you can see in our franchise brochure) all numbers are shown as Gross or including VAT. As the business is not trading, this VAT can be claimed back releasing cash back into the business at an important time of development. So, starting a monthly VAT return process really helps your business in the early stages. Another way to support VAT costs is via the banks; historically they have consistently offered VAT overdrafts to assist and take the VAT out of the equation.

Along with needing to consider your financial outlay you’ll know doubt be assessing how quickly you can make your money back and how much profit you’ll generate if you really commit to delivering your new store to our proven brand standard. Take a look at our franchise brochure which covers costs to open and how quickly you can expect to make your money depending on the specification of store or studio that you open. You can start your own TRIB3 with an initial investment of as little as £59k.

Time to be your own boss, time to seize your future. Get started now.