The Requirements to Get Funding For a Franchise in South Africa

What is a Franchise in South Africa?

In South Africa, a franchise is considered a separate, specialized field of business, and is therefore not put into the same category as buying an existing business. This is because franchises have a proven product, and they also offer a lot of support to the new business owner, so they are less risky for a lender.

How Can I Get Funding For my Franchise in South Africa?

Franchisor financing.

If you need funding to purchase a franchise, your first conversation should be directly with your prospective franchisor. Many corporations with franchise business models offer tailored financing solutions exclusively designed for their franchisees, either through partnerships with specific lenders or by providing capital directly from the corporation.

Commercial bank loans.

Another common way of financing your franchise is through a traditional term loan from a bank. A term loan is what most people think of when they think of any form of loan financing, especially if you’ve ever taken out a student loan or home mortgage. Under this model, a bank or alternative lender offers you a lump sum of cash up front, which you then repay, plus interest, in monthly installments over a set period of time.

Crowdfunding.

If franchise financing isn’t available and bank, SBA, or alternative loans don’t pan out, obtaining financing for your franchise may require some creativity. One of the newer and more creative ways of financing a franchise is through crowdfunding.

Can a bank give you loan for a franchise?

Yes. Banks are primary sources of finance for business owners. In Order to access the financing they need, business owners can approach a bank for a loan. Many of the major banks in the country have a franchise division with a focus on franchise financing.

Is it possible to start a franchise with no money?

One of the commonest hindrances of starting a Franchise is money. However, in a Situation you don’t have the capital to start the franchise on your own, worry not! , you can consider bringing on a partner who can finance the project. If you don’t have a spare R200 000 – R500 000 lying around, you might have to rely on equity finance or ask your friends, family and old business associates to help you buy the franchise.  An investor can be a friend, family member, or even an old work colleague. Nonetheless, if you choose this route, be aware that you’re giving up partial control of the business.