How do I go about funding?

Nigel Toplis
Managing Director, Recognition Express and ComputerXplorers
A: A number of the high street banks have specialist and experienced franchise departments and they should be on your short list of people to approach - always see more than one and compare interest rates; payback period; free banking terms; capital holiday and secured/unsecured options.

Additionally, you should give thought to other forms of funding - you would be amazed by how much you will be able to raise from your own arena - extending your mortgage; cashing in investments; loan from family members and so forth. There are other loan companies, too, who will also look at franchising, such as a lease financing group.

Whichever route you choose, ensure you are comfortable with the lender; that you have compared at least two lenders and, most importantly, that you neither over-extend yourself nor under-capitalise the business.

Cathryn Hayes
Head of Franchising at HSBC
A: Most of the major banks have specialist franchise units you can talk to. HSBC has had a dedicated franchise unit for more than 25 years.First of all you need to research your chosen franchise carefully, making sure it is right for you. HSBC has a comprehensive Starting a Franchise guide, which can assist you with this. For a free copy, go to www.hsbc.co.uk/franchise.

You also need to ensure you can afford to purchase your chosen franchise and that it offers a good return on your investment. For an established franchise, most of the major banks will lend up to 70 per cent of the start-up costs, for new franchises around 50-60 per cent.

The next step is to prepare a business plan, including cash flow forecasts for the first couple of years of trading - vital documents for obtaining finance. Your franchisor will help, but you need to understand the figures and take ownership of the plan.Potential franchisees are likely to be considered more favourably than a conventional start-up, however, the bank will still carry out a thorough assessment of your proposal.

It is important to consider the financial implications carefully before buying a franchise. You are entering into a long-term commitment and need to get the finance right at the outset. Your bank manager will work with you to put together a finance package that suits your individual needs.