Business loan advice needed please

redballoon_2

hubby is keen on buying a franchise and would need a loan to buy it roughly about 20,000.

I dont think he's got a particulary good credit history, so would it help if he was put on to our mortgage as currently it's just in my name (as at the time we got the mortgage, huby was ending self employment and looking for a job so didn't think the bank would take him into consideration, so it was just simpler for it to be in my name and for it to work off my wages)

we are in a bit of a crisis situation at the moment, as he had a job, but that ended so we are still living in my overdraft limit and it's very very tight.

he is thinking of adding more to the loan for his wages for the first two months. do you think they woud allow for this?

What conditions do you have to meet for a business loan and what would you need to provide them with?

The franchise compant have told us that one of the high street banks recognise the franchise and are wiling to loan the money to franchisee buyers.

i am trying to get this all in my head, i guess i am a little worried that he wont make enough money to pay the loan back as well as our credit card and overdraft

FakeIrish

Before you do anything, book yourself in to see an adviser at Business Link. Visit their site at http://www.businesslink.gov.uk

Astaroth

A lot depends on how you are setting the business up.

If you are a sole trader then you and your "company" are legally one and the same and so your personal credit history comes into play.

If you are a limited company then you and your company are legally two seperate entities so your business plan is the grounds for considering if the company is a good credit risk or not.

The business Link can be very good - there is lots of info on their site too - but it can depend to some degree on the actual advisor that you get to speak to (as with most things)

Make sure you do a lot of research into the francise and try to talk to some other people running the francise which you locate off your own back rather than ones that the company puts forward. I have known too many people go under because they trusted a brand name and the testimonials on their promotions

Daytripper_2

Tell your husband not to go anywhere near a franchise.

Let me explain to you the true meaning of a franchise:

1- By buying into a franchise you are purely buying yourself a job for minimum wage if you are lucky! I have known a lot of franchisees that work on average 70-80 hours a week for no money at all (myself included); £20k is a lot of money for a minimum wage job.

2- The royalties(R) and what they call National Advertising Fund(NAF) is a total rip off (most of the Advertising fund will be absorbed by salaries for the marketing department rather than spent on advertising). The R+ NAF can be between 10%-13.5% of your total gross sales. It doesn't matter whether you are making a profit or not, as far as the franchisor is concerned they will get their money regardless of your business sinking or swimming.

3- You will have to pay an initial franchise fee for using their name.

4- You will also have to pay the franchisor legal, project management and any other overheads incurred by them while they selling you the franchise.

5- You will need to pay for a training course provided by them; yet again from my experience it tend to be lot of money for nothing, purely a course for common sense.

6- They make you think that by buying a franchise you are buying into a collective and a lot of support, this is completely untrue statement, franchisors have the biggest staff turnover and they tend to find it hard to keep staff, therefore, how can you have the support if there is no continuity?

7- Just in case your franchise didn't work after a year or number of years; IF you ever decide to sell it (this is if you didn't go under already) you will have the following to go through:

- The franchise will only be sold to someone approved by the
Franchisor (this process can take months if you're lucky
Or even up to two years);

- You will have to pay the franchisor an exit fee (mainly
Legal, overheads and in some cases they can even take a % of
Your selling price);

- If you financed your franchise by obtaining a bank loan,
Remember that you will have to pay it back to the last
Penny.

Now, the moral of above is DON'T ever think of, toy with, consider the idea of a
Franchise. If you think that you are in bad shape financially now; wait and see what will happen after buying a franchise!

If you have any specific questions pls feel free to pm.