Want more franchise partners engaged with national roll outs of new equipment?

Servicing is our other great affordability measure. From a financier’s perspective the question of whether or not someone can afford a particular franchise (or anything at all) is usually wrapped up in what lenders broadly refer to as ‘servicing’. At any given time of day, in banks and finance companies across the country, grey haired and bespectacled risk assessor types can be found shuffling through page after page of carefully prepared loan applications, ignoring almost everything written upon each page, before looking up and asking THE question “Does it service?” I jest of course, we stopped using paper long ago, we peer over computer screens these days and some of us are much less ‘banky’ than others, but in some form the question “Can they afford to pay all their bills and repay our loan?” is definitely still being asked.

This might seem like the simplest of calculations, income – expenses = profit, right? Sure, but there are lot of what if’s and maybe’s that go into that question. Firstly, for a new business almost every component of your financial forecast will be an assumption, your best guess as to what things will cost. You might not have chosen premises yet, so rent will be an assumption. You might not have hired staff yet, what if you have to pay more to get the people you need? What about income? Hopefully you know how many customers you need, or how many sales you’ll have to make, and what it will cost you, but all of it is still your best guess. Your lender might test your assumptions against other similar businesses, maybe even against other franchises in the network, but your future as a franchise owner is still somewhat unknown.

Generally, your lender is going to want to see that your business will generate enough income to pay its bills (including taxes) and have enough left over to make your loan repayments. Remember also that if you’re going to be working in the business the lender is probably going to want to see that you can draw a living wage (whether through profits or as an employee).