Bank valuations aren’t always required when purchasing a franchise business.
When a franchise business is being sold on the open market in an ‘arms-length’ transaction, lenders will often adopt the Contract of Sale price as the value of the business. They may also complete their own assessment of the underlying business value using a multiple of the sustainable net profit of the business and comparing this to the Contract of Sale price.
Where you have an existing franchise business and are using the equity in this business to fund another project, lenders will generally work off a multiple of the sustainable net profit of the business to arrive at an estimate of current value.
In a small number of cases, the lender may request a valuation of the business being purchased, although in the vast majority of cases this is not necessary.
What type of funding is available?
Funding can be available for a variety of uses, including:
- Purchasing an existing franchise business
- Leveraging off equity in an existing franchise business to purchase a new store
- Purchasing a new greenfield store
- Fit-out finance for refurbishment and extensions
If you are considering purchasing a new franchise business or would like access equity in an existing franchise business for a new project, the experienced commercial finance team at GFG can help.