Fit-out finance · Franchises
Fit-out finance for franchises
Franchise finance is lending to franchisees, funding the initial franchise fee, fit-out and equipment package for a new site, resales of existing franchises, and multi-site expansion within a system.
How fit-out finance works for franchises
Franchisor-specified fit-outs are non-negotiable and often expensive, because brand consistency requires particular joinery, finishes, signage and equipment positions. None of it is recoverable if the site closes. Fit-out finance spreads the cost across the franchise or lease term so opening cash goes into stock and staff. Watch the alignment of three dates: the lease term, the franchise agreement term and the finance term. Financing beyond the shorter of the first two is a risk worth avoiding.
The cash-flow pattern we plan around
A single large set-up cost before opening, then trade that ramps over six to twelve months while royalties, marketing levies and rent apply from day one.
What franchises typically fund
- Initial franchise fee and training costs
- Fit-out to franchisor specification
- Standard equipment package and opening stock
- Buying an existing franchise on resale
- Adding a second or third site
Fit-out finance for franchises: the numbers
| Typical amounts | $20,000 – $1,500,000 |
|---|---|
| Term | 12–60 months |
| Indicative rates | 9.5% – 22% p.a. |
| Repayments | Monthly |
| Speed | 3–10 business days |
| Documents franchises usually need | Franchise agreement and disclosure document · ABN, personal financial position and asset and liability statement · Franchisor build cost schedule or contract of sale for a resale |
Rates are indicative, change without notice and depend on the lender, product, asset, term and your credit profile at the time of application. They are not an offer of finance. Comparison rates, where shown, are true only for the example given.
Key terms
Franchise finance
Franchise finance is lending to a franchisee to fund the initial fee, fit-out, equipment and working capital of a franchised business, assessed against the franchise system’s performance data as well as the individual applicant.
Lender accreditation of a franchise system
Lender accreditation of a franchise system is a pre-assessment in which a lender reviews a franchisor’s model, agreement and site performance, allowing franchisees within that system to borrow on pre-agreed terms.
What is fit-out finance?
Fit-out finance is business lending used to fund the construction or refurbishment of commercial premises, including joinery, flooring, lighting, signage and the equipment installed. It typically combines secured equipment finance with an unsecured component for fixed works.
Can leasehold improvements be financed?
Yes, but usually not as secured equipment finance, because fixed improvements attach to a building the borrower does not own. Lenders fund them through unsecured facilities or specialist fit-out products, priced above standard asset finance.
How does a lease term affect fit-out finance?
Lenders will not normally amortise fit-out debt beyond the remaining term of the premises lease, including exercisable options. A five-year lease generally means a fit-out loan of five years or less.
Questions from franchises
How is a new franchise site financed?
Franchise finance funds the initial fee, fit-out, equipment and working capital for a new site, with many lenders holding accredited franchise systems that qualify for higher loan-to-value ratios and lighter documentation because the brand’s trading history is known. The franchisor’s disclosure document and site approval are the key documents.
Can I finance buying an existing franchise?
Yes. Franchise resales are financed against the site’s trading history, goodwill and equipment, often at a high proportion of the price for accredited systems. Lenders look at the site’s financials, the lease, the franchisor’s consent and the buyer’s experience.
How do franchisees fund the ramp-up period?
A working capital component is built into the franchise loan or a line of credit covers royalties, rent and wages while trade builds over the first six to twelve months. Lenders expect this and size the facility from the franchisor’s typical ramp-up figures.
Can a first-time franchisee get finance?
Yes. First-time franchisees are financed on the strength of the system, a deposit of typically 20 to 40 per cent, a clean credit file and relevant experience, and accredited systems make approval easier. Lyft Money knows which lenders accredit which franchise brands.