Answers

I am interested in possibly investing in a home-based franchise, and would need to borrow around £10K. Should I just get a small loan rather than a specific franchise loan?

Cathryn Hayes: I would always recommend that you speak to a commercial manager at your bank when setting up a new franchise. You should prepare a business plan, even if you don't need to borrow, and by discussing this with your bank, you can find out all the options available for financing your business.

It may be that a short term overdraft facility is all you need, or it may make more sense to fund your borrowing on loan over a period of time to suit your cash flow - there is no 'right' answer here, just what suits you and your business best. You will need business banking facilities whether or not you need to borrow - and it is a good idea to begin to build up a business relationship with your bank.

This will help in the future, when possibly you might want to expand, or move to office accommodation, or buy another territory for instance. Some people raise funds to buy their franchise through a secured personal loan. Whilst this can be suitable in some instances, it is unlikely to be a good idea to borrow over a long period, for instance by increasing your mortgage, as the longer the term, the more interest you pay.

Whether you need to borrow money to start your franchise, or just want to open a business account, you should speak to banks who are affiliated to the British Franchise Association. These banks, including HSBC of course, understand the benefits of franchising and may be able to lend up to 70% of the total setting costs for more established franchises, though more likely to be 50-60% for newer franchises. You should 'shop around' to find the most suitable package that meets your requirements, taking into account that you will have an ongoing relationship with your bank.