5 Ways to Fund Your Franchise in the UK for Under £25,000

Starting a franchise can be a smart business move, particularly when you choose one with a lower entry cost. Many UK franchises cost less than £25,000, making them accessible for budding entrepreneurs. However, securing funding can still be a challenge if you don't know where to look. Here are five effective ways to fund your franchise and kickstart your entrepreneurial journey.

1. Personal Savings
One of the simplest and most straightforward ways to fund your franchise is by using your personal savings. Franchises with low startup costs, such as cleaning services, pet care, or tutoring businesses, are often within reach for individuals who have been saving for a business opportunity.
Why It Works:

• Avoids debt and interest payments.
• Provides immediate access to funds.
• Demonstrates commitment to potential franchisors.

Key Consideration:
Ensure you maintain a financial safety net for personal emergencies. Using all your savings may leave you vulnerable in case the business takes time to generate consistent income.

2. Franchise Financing from the Franchisor
Many franchisors offer financing options to help new franchisees get started. These financing packages are tailored for the specific franchise and may cover startup fees, equipment, or initial inventory.
Example Franchises:

• Cleaning franchises like Maid2Clean or Time For You often have financing partnerships. We at RBSS Consulting Ltd also help with raising finance for franchises
• Home-based tutoring franchises such as Tutor Doctor provide manageable entry costs and financing support.

Why It Works:

• Shows the franchisor’s confidence in their model.
• Flexible repayment options tailored to the franchise’s revenue streams.

Key Consideration:
Carefully review the terms and interest rates to ensure they are competitive compared to other lending options. 
 
3. Government-Backed Start-Up Loans
The UK government offers Start-Up Loans, designed to support entrepreneurs launching or growing their businesses. These unsecured loans range from £500 to £25,000, making them a perfect fit for franchises under £26,000.
Why It Works:

• Fixed interest rates and affordable monthly repayments.
• Includes free mentoring and business support.
• You can apply for up to £25,000 individually, or multiple partners can apply together for larger funding.
• At RBSS Consulting we have an excellent record in helping our clients raise finance by helping with their business plans and financials required to access such funding

Eligibility:
You must be over 18, a UK resident, and planning to start your business in the UK. Franchises with clear business models are particularly well-suited for these loans.

4. Bank Loans for Franchises
Many high street banks in the UK offer tailored loan packages specifically for franchise businesses. Banks like Lloyds, NatWest, and HSBC have dedicated franchise units with advisors familiar with franchise models.
Why It Works:

• Banks value the reduced risk associated with franchises due to their proven business models.
• Some banks offer competitive rates or flexible repayment terms for franchises under £25,000.

Example:
NatWest and HSBC often finance low-cost franchises with strong track records. For instance, vending machine franchises or mobile car valeting services typically qualify.
Key Consideration:
A strong business plan and understanding of your franchise's projected profitability are essential to secure approval.

5. Crowdfunding or Peer-to-Peer Lending
Crowdfunding and peer-to-peer (P2P) lending platforms have become popular options for small business financing in recent years. Platforms like Funding Circle, Crowdcube, and Kickstarter allow you to raise funds either as loans or equity investments.
Why It Works:

• P2P lending platforms often have lower interest rates than traditional bank loans.
• Crowdfunding offers the added benefit of marketing your business to a community of supporters.

Example Scenarios:

• A community-focused food delivery franchise could attract local supporters through crowdfunding.
• P2P lending is ideal for service-oriented franchises, like domestic cleaning or gardening services.

Key Consideration:
Crowdfunding campaigns require effort and a compelling pitch to attract investors, while P2P lending still involves repayment obligations.
Bonus Tip: Combine Multiple Sources
Many franchisees successfully fund their businesses by combining two or more funding sources. For example:

• Use personal savings to cover initial fees and apply for a government-backed loan for operational costs.
• Pair franchisor financing with a small crowdfunding campaign to boost startup capital.

Why It Works:
This approach reduces the pressure on a single funding source and allows you to maintain financial flexibility.

Final Thoughts
Franchises under £25,000 provide an excellent opportunity for first-time entrepreneurs, but securing the right funding is key to success. Personal savings, franchisor financing, government loans, bank loans, and crowdfunding all offer viable pathways. Whichever route you choose, ensure you conduct thorough research, develop a solid business plan, and fully understand the terms of your funding.

Remember the words of Henry Ford: “Whether you think you can, or you think you can't – you're right.” Taking that first step to fund your franchise might just be the beginning of your entrepreneurial dream.

If you’re ever unsure, remember that there’s always help available, whether you need help to raise finance or advice on how to grow your business, support with business expansion strategies or a business start-up loan to get things moving, all you need is to give us a call today on 0333 355 1696 or send us a message on [email protected].

Let us know your thoughts or experiences with funding your franchise in the UK—share your journey in the comments!