Service offerings vary within this group of franchise opportunities. Many loan franchises provide financial help during difficult emergency situations where families find themselves living paycheck-to-paycheck. Additional major service areas of loan franchises include, but are not limited to: mortgage brokerage, debt consolidation, car loans, and more.
Another special area of focus for loan franchises has become small and mid-size enterprises (SMEs). Franchises offer support to companies under this umbrella term through business loans, asset finance, invoice discounting, etc.
Per Brokerplan Academy, a business opportunity in the field, “In the last ten years, the lending landscape has changed radically, with UK banks becoming increasingly selective on whether they will support SMEs & property professionals with commercial finance and even individuals looking to buy their dream home. As a result, demand for professional and FCA compliant brokers across both the commercial and residential markets continues to increase.”
Do I Need a Financial Background?
No, you don’t need a background in finance to be a loan franchise owner. In some cases, it could actually work out better if you don’t have previous experience. Franchisors provide you with the necessary training and ongoing support to ensure you can operate their business model successfully in the industry.
So what do loan franchisors look for in potential franchisees? Here is an answer from one, Commercial Finance Network:
<blockquote>The most important qualities we are seeking are integrity, financial stability and enthusiasm, combined with a proven work ethic and desire to succeed. These are the key fundamental attributes required in order to run a successful business under the Commercial Finance Network umbrella.
Once fully trained, you will have the knowledge to enable you to provide the best practice solutions for your clients, with the comfort of an experienced back office support network to assist you every step of the way.</blockquote>
The Upside to Purchasing a Loan Franchise Instead of Going It Alone
Having an original and feasible idea for a new business is rare. However, the lack of an innovative, fresh idea shouldn't keep you from becoming your own boss. Buying a franchise allows you to do just that.
When you invest in a franchise, you take on the methods of a business that (1) understands its established target market, and (2) has proven itself profitable and sustainable.
Independent companies that go into business without the support of an established partner often struggle to penetrate the market. They sometimes misunderstand what their customers want and how to fulfill that desire. It can take a long time, along with trial and error, for an independent company to get their service offering right. Franchisors have already been through this process and offer their expertise, via the franchise model, to those wanting to own a business in their service area.
In addition, as part of the financial industry, keeping up-to-date on new legislation and new product offerings is imperative to success.
As noted in the Brokerplan Academy quote above, “demand for professional and FCA compliant brokers across both the commercial and residential markets continues to increase.”
First, what is FCA compliance? The Financial Conduct Authority (FCA) sets the standards for thousands of businesses and firms in regards to financial regulation in the UK. Firms and individuals must be authorised or registered by the FCA to carry out certain activities.
According to the FCA, “Before we grant authorisation, firms must demonstrate that they meet a range of requirements. We then supervise these firms to make sure they continue to meet our standards and rules after they’re authorised. If firms and individuals fail to meet these standards, we have a range of enforcement powers we can use.”
Luckily, loan franchisees have the support of their franchisor in maintaining this compliance. Remember, how you do greatly affects how they are perceived.
Your franchise parent company usually provides an excellent training package for you and your employees to ensure that you can maintain their hard-earned reputation. In addition to training, many franchise partners offer a range of business support functions, including an operations manual, marketing support, and even help in finding clients.
Further, if you need a loan of your own to begin a loan business, you might find it easier to gain funding with a franchise.
Investing in a franchise is often considered a safer option than creating an independent business from the ground up. This is certainly the case for lending institutions, franchises have been more likely to appeal to banks and money lenders and draw the necessary capital to start the business since franchises have a demonstrated history of feasibility and market sustainability.
Independent companies often find it a challenge to procure loans with sensible borrowing rates since they have no evidence that their business will reach potential. This lack of faith from lenders has the potential to jeopardise their company from the start.
Having enough money before you start is important. The first couple of years of any business can bring challenges, placing most independent businesses at imminent financial risk. Without the ability to generate enough revenue to cover initial and operating expenses, independent business owners will likely find the venture unviable. In fact, more than half of all independent start-up companies go out of business within the first two years in the UK.
What to Look for When Selecting a Loan Franchise
Loan franchises are a part of the broader accountancy and financial franchise industry. When determining what accountancy or financial service franchise you may want to invest your money and time into, you should consider the role of the franchisor. How much and what type of support you would like to receive from the franchisor both initially and on an ongoing basis.
Although all franchisors provide their licenced and easily recognised name, the level of support and kinds of services they offer will vary. A hands-on franchisor may extend a combination of the following:
- Advertising and a proven approach to marketing
- Assistance choosing and developing the franchise site
- Continuing business advice
- Field support from the home office
- Licencing
- Management training
- Mentorship
- Operating manuals
- Quality control
- Supplies and support equipment
It is essential that you realise that the franchisor owns the rights to the name and its business strategies. You, however, independently own your franchise. Therefore, you are accountable for the everyday decisions that affect your business and any clerks or support staff members employed by it.
If your company experiences an increase in business with a steady stream of revenue and profitability, it is because of your efforts and managerial skills. If it suffers a loss, however, it is your responsibility, as well.
Choosing a franchisor who provides adequate support without being overbearing will benefit both parties.