Business Start Up?

jayneuk

Hi,

Wonder if anyone can help. Wasn't sure which forum to post this in.

Is there anything you can do if you want to start up a business by buying a franchise and need a loan to buy it, but have poor credit rating?

My friend and I have found a franchise we want to buy that we are sure we could make work. The cost is £9000, so it would be £4500 each. We both have bad credit ratings - she has been bankrupt but is now discharged. Neither of us can even open a bank account, so we would never get a bank loan would we?

Anyone got any ideas?

Regards Jayne

TGXbuyer

Hi Jayne

Couple of questions then:

If the franchise purchase from the master franchiser, or a re-sale?

Secondly, I should say I'm generally not a fan of small franchises - the point of buying a franchise is the reputation (and therefore easier access to new clients/customers), but most small franchises really don't have that amount of pull. Can you not copy the business model of the franchise and start from scratch - I doubt you'll find yourself that much behind if you price/market correctly and becuase you're (a) not paying the initial fee and (b) not paying the annual % commission, you can probably undercut the franchise anyway?

Happy to offer further thoughts once you've answered top question

cheers
TGX

jayneuk

Thanks so much for your reply.

It is from the master franchiser, not a reseller.

I absolutely agree with what you say. In this case though, the franchise cost involves training as it isn't something we could just do right now by ourselves, and I'm not sure there is another way of us getting the training.

I think your points are especially relevant actually because it isn't a very big company. In fact I think they only starting franchising a year or two ago.

TGXbuyer

Okay, if it's the master franchiser, you might just ask them if they can facilitate finance?

In terms of training, I cannot offer any advice without knowing what the franchise business area is. Can you advise, or PM me if you prefer

cheers
TGX

TGXbuyer

thinking further about the original finance question, you could think about:

(a) friends / family - maybe offer a share of the profits if you're asking them to take the financial risk?

(b) have you checked out your local businesslink (www.businesslink.gov.uk) - the local advisors can often help with respect to securing finance, but more importantly they'll give you some advice on how to rigorously analyse the business opportunity in an objective sense. This is essential - it's really easy to fall in to the trap of thinking that because you like the product/service on offer, everyone will like the product/service on offer. I don't wish to appear patronising, but I've been there myself and it wasted money, was demoralising and most importantly wasted time.

(c) try the bank, but recognise they'll want you to demonstrate a well-thought through business plan, your ability (skills, experience) to deliver that business plan and likey, collatoral (homeowners either of you?)

(d) A business Angel - highly unlikely here though as it's not scalable (franchises by their nature restrict the purchaser a geographical area or something similar and), too small (most of the Biz Angels I know look in the £10k's to £100k's. There might be some smaller bizAng lites around who would consider though, but they'll want a decent chunk of the profits. Check out www.singingpig.co.uk and go to the business start-up section - you might find someone on there who can help? Haven't been on there myself for a few years though so not sure of the quality/profile of the members these days.

(e) government grant - not sure if the Enterprise Initiative Scheme is still going - used to be able to borrow a few grand for this sort of thing at very low interest rates. Businesslink should be able to advise what's around at the moment.

jayneuk

I have pm'd you but not sure it went through. Have you received it?

We have no family or friends that would be willing to do it. The banks won't touch us I don't think.

richt71

I'd recommend business link as well as you need to do serious checks on whether this business is likely to work for you. Does it require any working capital on top (many do) and if so how much. How are other franchises doing?