You are never too young to start your own business through franchising
What are the funding options for young entrepreneurs?
There are countless examples of young entrepreneurs enjoying remarkable success the length and breadth of the country. Age is clearly no barrier to starting your own business if you have the drive and passion to succeed, combined, of course, with the right business idea and the right support systems in place.
But one question which is always asked is; how did these successful young entrepreneurs fund the launch of their business in the first place? What funding options are available? Who do I speak to for advice?
Richard Holden, head of franchising at the Lloyds Banking Group, says there are various options available to young people who want to start their own business, especially if they look at franchising as an option.
“Investing in a franchise opportunity is becoming an increasingly popular route into self-employment for enterprising individuals looking to build a successful future. A well-established franchise provides a tried, tested and proven business model with initial training and support throughout the life of the business from the franchisor. Understandably franchising is an attractive option for the savvy investor.
“Young entrepreneurs need support with various business skills that can only be mastered with time and experience. Franchising can be a great way to build knowledge and skills supported by an experienced franchisor who has first-hand experience of operating the business who can offer guidance on how to avoid the many pitfalls running any business will bring. Of course operating a business independently outside a franchise model often means you are on your own and no one is on hand to provide the expert support new business owners will need.
“Frequently young people haven’t got the resources to start their own business and raising finance to support their business development plans can be a challenge. There is help available to support enterprising young people with their business development and financial needs. In fact, there are so many organisations that offer small business grants and loans for new businesses that the choice can almost be overwhelming.”
Who should I speak to?
“A great place to start your search for funding is to speak with franchise specialist banks, such as Lloyds Bank. Don’t speak to the local manager as it could be hit and miss whether you speak with someone who truly understands franchising. Initial contact should be made with the bank’s Franchise Unit who can offer expert guidance and assist with your finance plans. Not all banks have franchising experts available to guide you so choose wisely.
“The bank will want to see a detailed business plan including financial projections so that they can assess your business funding requirements. It is advisable to send in your business plan to the bank’s franchise team who can facilitate setting up a meeting with a locally based manager to review your banking and funding options. They will ensure that the local manager is fully briefed about the franchise brand you are looking to invest in prior to your appointment.
“Practice the delivery of your pitch to the bank beforehand so you are well prepared for the meeting. Learn from the BBC Dragons Den program as many business owners have no chance of securing the investment they are looking for. They may know their business operation well but when Peter Jones or Deborah Meaden challenge their understanding of the financials for their business they fall apart. Ensure that you are well prepared, as the bank manager, like the dragons, will ask questions and expect them to be answered confidently.
“Banks tend to consider unsecured business loans up to £25,000 and above this figure they tend to seek security in the form of a personal asset to support the agreed finance. If a young entrepreneur hasn’t built up their asset base to be in a position to offer the bank security, then the government backed Enterprise Finance Guarantee Scheme may be available from the bank to finance your franchise plans. This scheme is available to people with strong business proposals but who lack assets to offer as security.
“Asset Finance may also be available to assist with the purchase of a vehicle or certain business equipment and the asset itself is the lender’s security avoiding the need to pledge personal assets to cover the financial commitment. Invoice Financing is another option to some business owners for raising capital without the need to provide collateral to the lender. Speak to the bank who can offer you guidance as to your best funding options.”
Additional assistance is available from a number of sources:
The Prince’s Trust programme equips 18-30 year olds with the training, tools and mentoring support they may need to start their own business and they also offer low-interest loans.
Start Up Loans is a government-funded scheme that funds and mentors entrepreneurs. People can apply for a low-cost unsecured loan, business mentoring and a range of business support products if their plan is approved.
Shell LiveWIRE, is an online community for young entrepreneurs aged 16-30 offering free business advice and funding.
Young Enterprise supports young people to harness their personal and business skills.
Virgin StartUp is a not-for-profit organisation that helps entrepreneurs aged 18 and over get the funding, resources and advice they’ll need to make their business idea a reality. Currently this is only available in England.
If you are interested in franchising and want to discuss what funding options are available to you, please contact Richard Holden and his team at the Lloyds Bank Franchise Unit for further guidance:firstname.lastname@example.org.
The British Franchise Association (bfa) has recently launched a campaign to encourage more young people into franchising as a way of launching their own business. For further details please visit the bfa website – www.thebfa.org