Specialist franchise bankers

New Zealand business confidence has seen a significant improvement in recent months, currently reaching its highest level in a decade. Some of the key factors to have contributed to this increase in business confidence are the falling interest rates, easing inflation and improved economic outlook. 

The Reserve Bank of New Zealand’s decision to start the OCR cuts in August, with the likelihood of more OCR cuts to come, has provided relief for businesses facing rising costs. The annual inflation rate in New Zealand eased further to 2.2% in the September quarter of 2024, from 3.3% in the prior quarter. This marked the lowest reading since March 2021, reducing the burden on businesses and consumers. The overall economic outlook for New Zealand has brightened, boosting business confidence. As a business owner, these positive signs may encourage you to look at growing your business or buying a new one. Maybe it’s time to take on the next challenge in your life...

Invest in your future

Starting, or growing, a business can be exciting and rewarding, but it also requires significant financial investment. As per the Franchising New Zealand 2024 survey conducted by Massey University and sponsored once again by Westpac, access to funding and lack of equity are two of the most challenging issues being faced by business owners in achieving their objectives. Bank loans have been a dominant source of funding for many of these business owners but many face challenges in obtaining finance.

As an experienced specialist franchise banker, I know this is where you will benefit from finding a specialist franchise banker who understands your franchise business and your objectives. They can help you to successfully launch and grow your business. Choosing a bank that understands the franchise model and benchmarking information can significantly improve your chances of securing funding for your business.

Unique understanding

Specialist franchise bankers understand the unique financial needs and challenges of franchise businesses. Funding franchise fees, initial training fees, bank guarantees and fit-out requirements, including minor refreshes or major upgrades every five or so years – these are all understood innately by the franchise banking specialist.

Developing customised funding solutions that align with your business goals and growth strategies is what they do, day in and day out. With their in-depth knowledge of the franchise sector, franchise bankers can offer funding options by exploring different financing avenues, such as secured and unsecured bank loans, equipment finance facilities, overdrafts, business credit cards and lease and supply bonds. In addition to business banking, an efficient banker will be able to provide you with a full banking relationship. This should cover your transactional needs and personal banking such as home loans, vehicle loans, personal loans, personal credit cards and maybe more.

Common reasons for requiring finance include:

• Buying an existing business
• Setting up a new business
• Asset finance – for expansion or growth
• Working capital finance
• Restructuring existing debt
• Management buy-out
• Rental or other bonds

Fit-out requirements by malls or franchisors Franchisee-friendly If you are an existing franchisee, becoming a multi-unit franchisee operating multiple franchise locations can offer significant benefits over owning a single unit. Most franchisors are keen to provide opportunities for their successful existing franchisees to grow; they already understand the model and are thriving as a franchisee in the system.

One of the biggest constraints is finding the capital to grow. Many lenders require a significant deposit when requesting business loans, whereas a specialist franchise banker may be able to use the equity from your existing business to help you to fund the new business, without you having to bring in any new capital at all. This is, of course, subject to the profitability, affordability and the performance of the businesses and providing you meet the lending criteria of the bank.

While becoming a multi-unit franchisee can offer significant advantages, it’s important to carefully consider the challenges and responsibilities involved, such as financial resources, management skills, and market conditions before making a decision.

There are many more benefits of working with a specialist franchise banker, I have only covered some of the main benefits for the purpose of this article.

Information you will need to apply for a franchise business loan:

• Last 2-3 years of business financials for an existing business, from an accountant
• Up to date management accounts
• Accountant-prepared financial forecast
• Breakdown of set-up cost, if a new business
• Business plan
• Copy of sales & purchase agreement
• Copy of franchise agreement
• Copy of lease agreement

Further important information to cover off before applying for funding:

• When does the franchise agreement expire - does it have an option to renew? For how long? How much is the renewal fee?
• When was the last time the store had an upgrade?
• When is the next upgrade due and how much will it cost?
• When does the lease expire? Does it have an option to renew?
• Do you need a rental bond for the lease? How much?

About the author

Sujam Ratnayake is a highly experienced Franchise Relationship Manager for Westpac, based in Auckland. Contact the Westpac Franchise Team on 0800 177 007 or Email: franchising@westpac.co.nz

The information contained in this article is intended as a guide only and is not intended as an exhaustive list of matters to be considered. Persons entering into franchise agreements should seek their own professional legal, accounting and other advice.  

See this advertorial on page 22 of Franchise New Zealand magazine Year 33 Issue 4

Contact details for Westpac New Zealand

For more information and advice on buying a franchise get your FREE copy of Franchise New Zealand magazine.

We welcome links from other websites to this article. Please note that this article is copyright © Eden Exchange NZ Holdings Limited, Franchise New Zealand magazine and Franchise New Zealand On Line. While it may be downloaded for personal use, no part may be reproduced on any other website, in electronic or printed form or in any other form whatsoever.