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How to Finance a Homecare Franchise

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Home Care is a growth area and demand for franchises is increasing. But what is the best way to fund your purchase? Lloyds Bank Franchise Development Manager Sukhdeep Dehal QFP advises

INVESTMENT COSTS

When looking to raise finance for a care franchise, one of the first factors to consider would be to ensure that you can afford the business. Most franchisors will be able to advise you of the total investment costs including the proposed working capital needed to set up the business.

This total cost would also include the franchise fee, equipment costs and professional fees such as CQC registration. Franchise banks are able to support your purchase by lending between 50% - 70% of these costs, with the remainder needing to be input from your own personal savings.

Another factor to consider will be the potential need to provide security. If you are looking to borrow in excess of £25,000 it is likely that the bank will require you to put up personal assets as security for any loan agreed.

This could be in the form of taking a charge against property with sufficient equity. However, if you don’t have property available, this doesn’t necessarily exclude you from borrowing more than £25,000.

If you have a strong business plan but don’t have any personal assets to support the lending then the bank may be able to consider financing your plans using the Government-backed Enterprise Finance Guarantee Scheme.

This scheme will usually require a slightly larger deposit, but will allow viable proposals to be supported.

Speak to the bank’s Franchise Department for guidance as to whether you would be eligible for this scheme, as you would need to ensure that you have fully invested your available assets into the business before being eligible. This would include all of your personal savings and investments, along with any available equity in properties that you own.

How to Finance a Homecare Franchise

LOCAL DEMAND

When you select the brand you wish to progress with the franchisor will require you to produce a robust business plan, to outline how you will be successful in your territory.

It is important that you research your local market. Some business owners neglect this step and as a result have little understanding of the local demand, competition and the changing needs of their potential clients before they start up.

Within the care sector this could include the number of potential elderly clients within a territory, level of affluence for prospective clients or quality of existing competitors.

By carefully researching all of these areas in addition to others suggested by the franchisor you will be able to ensure there will be sufficient demand for your services and maximise your chances of successfully gaining the finance needed to set up the business.

Most franchisors encourage and support their franchisees with producing their business plan. Banks can provide business planning templates to assist business owners in writing their plan, however, franchisors will also have
developed templates to support.

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