How to finance a UK franchise: loans and BFA lenders

What to take away

Banks that lend to UK franchises

The British Franchise Association runs an accredited lender scheme. Members have included Barclays, HSBC UK, Lloyds Bank, NatWest and Santander UK. It signals a shared review process, not a fixed price.

You approach the bank's commercial team rather than a franchise desk. Bring a business plan, projections and the franchisor's disclosure document.

NatWest routes equipment deals through Lombard, its asset finance arm. Barclays and HSBC UK publish franchise lending pages through their business banking arms.

Franchise royalty fees come off the top before debt, so model them in the cash flow you show the lender. No bank publishes a standard franchise rate.

Start Up Loans and public support

GOV.UK's finance and support for your business page publishes the current Start Up Loans range, £500 to £25,000 per applicant, alongside grants and regional schemes.

The British Business Bank delivers the scheme. Interest is fixed at 6% a year simple, and each successful applicant gets a business mentor.

The money is unsecured personal lending, so it appears on your credit file and stays repayable if the franchise closes.

Support outside England differs. Business Gateway in Scotland, Business Wales and Invest Northern Ireland run their own start-up advisory services.

Asset finance and equipment lenders

Fit-out, vehicles and kitchen kit are usually funded separately. Close Brothers Asset Finance and Novuna Business Finance both write hire purchase and lease deals secured on the asset.

Shawbrook Bank and Shire Leasing work in the same market. Rates are quoted per deal, so compare the total payable, not the monthly figure.

Because the asset is the security, this route can avoid a personal guarantee. Ask the lender to confirm that in writing.

What franchise loan requirements look like

Expect to supply three years of accounts or a full projection, a business plan, a personal budget and the franchisor's disclosure document.

Lenders also want the cash trough modelled month by month, from signature to the point where the unit covers its own costs.

Check the franchisor's filed accounts at Companies House before you borrow against the brand's name.

Repayments are fixed in cash terms, so check the ONS inflation and price indices when you compare a five-year loan against leasing.

Compare total cost of credit, not the headline rate. Arrangement fees, security fees and early repayment charges often decide the cheaper offer.

The four funding routes compared

The table sets each route against the security it usually needs and the speed you can expect. Any amount marked as set by the lender depends on your own figures.

Prepare the application in five steps

Personal guarantees and security under UK law

When the borrower is a limited company, a personal guarantee sits outside consumer credit protection. Directors are commonly asked to sign one, and sometimes to grant a charge over their home.

Unlimited guarantees are still written. If the lender will not cap the figure, treat the whole debt as personal exposure. Purbeck Insurance Services sells personal guarantee insurance.

Read the guarantee beside the franchise agreement key clauses that allow termination. A default under the agreement can crystallise the debt.

Capped amounts, joint and several liability and the lender's duty to notify you of account changes all shift the risk. Ask which applies before signing.

Common questions

Do I need a personal guarantee to finance a franchise?

Usually, yes, if you borrow through a limited company with no trading history. Some equipment finance is secured on the asset alone, which can remove the guarantee from that part.

Are BFA member lenders cheaper?

Not automatically. Accreditation means the lender agreed a process with the British Franchise Association. Barclays, HSBC UK, Lloyds Bank, NatWest and Santander UK still price each deal on your deposit, projections and security.

Can I use a Start Up Loan for a franchise?

Yes, if the amount you need per applicant falls inside the published range. It is personal debt, so you repay it even if the business closes.

What happens to the loan if the franchise fails?

The debt survives the franchise. A guarantee or charge can be enforced against your personal assets, so the repayment model matters as much as the entry fee.