When aiming to obtain franchise funding, entrepreneurs should firstly ensure that they make contact with the franchisor and obtain provisional approval as a potential franchisee. They must ensure that at least 50% of the total investment can be provided in cash or similar unencumbered funds. Financing a franchise is easier than financing an independent business, as there are many options on how to get funding for a franchise in South Africa.
Banks from across the country that offer business franchise funding include Standard Bank, Nedbank, Absa, First National Bank, and Mercantile Bank.
Alternative lenders or institutions are also a viable option for franchise funding. DTC can assist with providing access to these institutes and develop conforming funding applications. These lenders and institutions may have different requirements and turnaround times, compared to those of commercial banks. They offer a variety of loan options, credit, term loans, and grants.
This includes:
- Government institutions;
- Small business foundations; and
- Private lending companies.
The National Empowerment Fund (NEF), is aimed at entrepreneurs who wish to start their own businesses by buying a franchise to reduce risks associated with start-up businesses lacking a track record. The NEF funds franchises through a loan instrument with the term matching the duration of the franchise license, up to a maximum term of 7 years. NEF funding is generally capped at R10 million.
Business Partners provides business finance ranging from R500 000 to R50 million to established entrepreneurs with a viable formal business. The Masisizane Fund offers business financing from R250 000 to R20 million.
Franchisor funding is another option franchisees may consider. Certain franchise models offer tailoured financing solutions to their franchisees, either through joint venture partnerships or assisting with financing as enterprise development, BEE, or for awarding outstanding staff with a franchise opportunity.
Alternatively, crowdfunding, as another financing option, is where one reaches out to the public or a large number of people who can contribute variable small amounts of funds to achieve the funding goal.
Dream Team Capital specialises in business finance and assists with the finance process for SMMEs. We have South Africa’s largest network of finance partners that include venture capital companies, private equity firms, government BEE initiatives, banks, angel funds, crowd funds, Silicon Cape investment companies and rent to own funding initiatives for your funding requirements.
For professional assistance on how to get funding for a franchise in South Africa – Contact DTC
