Case Study- Franchise Lending 

“ One of the lessor known bank in the market moment is quite aggressive in doing franchise lending especially when established franchisors are involved.” - Keith Ho

Brand new customer approached me for funding last year in September for the purchase settlement of a Sushi Sushi franchise store for $ 820K. After submitting the application to one of the big 4 banks and after numerous numbers of credit rounds, the bank only was willing to extend 45% LVR against the purchase price of the business. 

Servicing was apparently quite tight and the forecast which was put together by the customer, and I was queried by the bank as they had access to a pool of benchmark data relating to that franchise (gross margin), average wage cost and seasonality adjustment for the sales revenue.

After 6 weeks of credit rounds, the bank was only willing to extend 45% LVR as supposed to the stand 60% LVR that you normally get for a franchise loan application. 

Given the requirement did not meet the customer's objective, I quickly put together and submitted the application to a non-Big 4 bank where I received an indicative term sheet within 2 days and a formal approval within a week of submitting. 

The bank extended 60% LVR and interest rate was 3% cheaper than the Big 4.

Lessons Learnt 

• Never assume that funding will be cheaper at a Big 4. 

• Never assume that Big 4 will always extend the most LVR 

If there are any live scenarios across your desk at the moment where you want to workshop- please give me a call on 0457 451 107

All the best for the week

Keith Ho  MAF, B.BFin

Director

Ho Finance- Finance Made Simple

Australia & New Zealand

LVL G/575 Bourke Street

Melbourne Victoria 3000

Australia

E:  [email protected]

M: 0457 451 107