{"id":317832,"date":"2025-07-01T06:00:00","date_gmt":"2025-07-01T04:00:00","guid":{"rendered":"https:\/\/feb26.lexpress-franchise.com\/en\/articles\/how-banks-see-franchising-in-the-uk-lower-risk-higher-standards\/"},"modified":"2025-06-18T15:39:41","modified_gmt":"2025-06-18T13:39:41","slug":"how-banks-see-franchising-in-the-uk-lower-risk-higher-standards","status":"publish","type":"post","link":"https:\/\/feb26.lexpress-franchise.com\/en\/articles\/how-banks-see-franchising-in-the-uk-lower-risk-higher-standards\/","title":{"rendered":"How banks see franchising in the UK: Lower risk, higher standards"},"content":{"rendered":"\n

In an economic landscape still feeling the aftershocks of the pandemic and ongoing trade tensions, franchising continues to offer an attractive path to business ownership. But how do banks perceive franchise businesses, especially when it comes to financing? And what makes a franchise more likely to get a loan approved?<\/strong><\/p>\n\n\n\n

\n\n\n\n

According to Phil Mowat, Managing Consultant at Ashtons Franchise Consulting, the appeal of franchising to lenders lies in its consistency and proven track record. \u201cBanks like franchise businesses because they often have a proven business model that\u2019s been running successfully across multiple locations before franchising,\u201d he explains. \u201cThey see the success of existing franchisees, repeat customers, recession-proof models, strong brand reputation, and a reliable support team \u2014 all of which lower the perceived risk.\u201d<\/p>\n\n\n\n

Franchising: A more predictable bet?<\/h2>\n\n\n\n

In a market where traditional small business lending has struggled to bounce back to pre-pandemic levels, banks are increasingly favouring structures that reduce risk. The Q4 2024 Business Finance Review from UK Finance notes that while gross lending to SMEs has increased 13% year-on-year, it still lags behind pre-2020 benchmarks. Interestingly, the increase in lending has been concentrated among larger SMEs and businesses with more robust financial plans \u2014 something franchising often provides.<\/p>\n\n\n\n

Franchise businesses tend to come with centralised support, brand awareness, and operational playbooks that help new owners navigate early hurdles. These qualities make banks more comfortable issuing loans, particularly in a cautious lending environment.<\/p>\n\n\n\n

Phil Mowat confirms this perception. \u201cStrong brand and customer reviews, as well as awards or industry recognition, also help,\u201d he adds. \u201cFranchisors with good management teams in place give banks more confidence that new franchisees will succeed.\u201d<\/p>\n\n\n\n

What franchisees should know about securing finance<\/h2>\n\n\n\n

Despite this favourable view, getting finance approved is far from automatic. \u201cA common misconception is that if an application is submitted, it will be approved just because banks \u2018like\u2019 franchising,\u201d Mowat warns. \u201cApplicants still need to fully present their case, just like with personal finance \u2014 creditworthiness, planning, and preparation are crucial.\u201d<\/p>\n\n\n\n

He advises franchisees to come prepared with:<\/p>\n\n\n\n

– A strong and detailed business plan.<\/p>\n\n\n\n

– A realistic cash flow forecast.<\/p>\n\n\n\n

– A good personal credit score.<\/p>\n\n\n\n

– Willingness to offer security for the loan.<\/p>\n\n\n\n

This aligns with UK Finance\u2019s Q4 2024 insights, which highlight a growing preference among lenders for better-prepared applicants. In fact, while loan approvals rose 23% in 2024 compared to the previous year, average loan sizes for small SMEs actually dropped below pre-Covid levels, suggesting that banks are cautious about extending large amounts to newer or smaller ventures unless there\u2019s a solid plan in place.<\/p>\n\n\n\n

Lending trends and what they mean for franchises<\/h2>\n\n\n\n

The data paints a mixed but encouraging picture. According to UK Finance, overdraft approvals surged by 47% in 2024, reflecting demand from businesses grappling with cost pressures and economic uncertainty. However, overall lending still favours medium-sized businesses \u2014 potentially those more likely to meet the detailed requirements that banks now expect.<\/p>\n\n\n\n

Moreover, invoice financing and asset-based lending (ABL) remained relatively strong throughout 2024, especially among larger firms. These types of financing are particularly valuable for franchises with high upfront costs or large supplier networks, offering a way to unlock working capital.<\/p>\n\n\n\n

But smaller SMEs \u2014 including new franchisees \u2014 still face hurdles. Many remain cautious, holding back investment while they monitor inflation, interest rates, and changing consumer behaviour. Franchisees hoping to buck that trend will need to demonstrate confidence and clarity in their projections.<\/p>\n\n\n\n

Beyond the numbers: The importance of education<\/h2>\n\n\n\n

Both franchisors and franchisees often underestimate the work involved in securing funding. \u201cIt\u2019s not just about showing demand \u2014 it\u2019s about showing that you understand the business and have a roadmap for growth,\u201d says Mowat. He sees a need for better education and communication around bank expectations, especially for new entrants to the sector.<\/p>\n\n\n\n

Banks, for their part, continue to signal readiness to lend \u2014 especially as challenger banks increase their share of SME lending, now accounting for 60% according to the British Business Bank. This competition may be good news for franchisees with strong cases but also means traditional lenders may tighten their requirements to minimise risk.<\/p>\n\n\n\n

What it means for franchisees<\/h2>\n\n\n\n

Franchising in the UK is still widely viewed as a lower-risk route to business ownership \u2014 but that doesn\u2019t make it a shortcut to financing. As banks adapt to economic headwinds and stricter credit standards, both franchisors and franchisees will need to raise their game to secure the funding they need.<\/p>\n\n\n\n

For prospective franchisees, the takeaway is clear: present a robust plan, understand the risks, and don\u2019t assume that the franchising label guarantees funding. As Mowat puts it, \u201cLike any borrower, franchisees must have their house in order.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

In an economic landscape still feeling the aftershocks of the pandemic and ongoing trade tensions, franchising continues to offer an attractive path to business ownership. But how do banks perceive franchise businesses, especially when it comes to financing? And what makes a franchise more likely to get a loan approved? According to Phil Mowat, Managing […]<\/p>\n","protected":false},"author":394,"featured_media":317836,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_titles_title":"How banks see franchising in the UK: Lower risk, higher standards","_seopress_titles_desc":"In an economic landscape still feeling the aftershocks of the pandemic and ongoing trade tensions, franchising continues to offer an attractive path to business ownership.","_seopress_robots_index":"","_seopress_robots_follow":"","_seopress_robots_imageindex":"","_seopress_robots_snippet":"","_seopress_robots_primary_cat":"none","_seopress_robots_breadcrumbs":"","_seopress_robots_freeze_modified_date":"","_seopress_robots_custom_modified_date":"","_seopress_robots_canonical":"","_seopress_social_fb_title":"","_seopress_social_fb_desc":"","_seopress_social_fb_img":"","_seopress_social_fb_img_attachment_id":0,"_seopress_social_fb_img_width":0,"_seopress_social_fb_img_height":0,"_seopress_social_twitter_title":"","_seopress_social_twitter_desc":"","_seopress_social_twitter_img":"","_seopress_social_twitter_img_attachment_id":0,"_seopress_social_twitter_img_width":0,"_seopress_social_twitter_img_height":0,"_seopress_redirections_value":"","_seopress_redirections_enabled":"","_seopress_redirections_enabled_regex":"","_seopress_redirections_logged_status":"both","_seopress_redirections_param":"","_seopress_redirections_type":301,"_seopress_analysis_target_kw":"","_seopress_news_disabled":"","_seopress_video_disabled":"","_seopress_video":[],"_seopress_pro_schemas_manual":[],"_seopress_pro_rich_snippets_disable_all":"","_seopress_pro_rich_snippets_disable":[],"_seopress_pro_schemas":[],"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"81928,84107,156184,83778,192738,78400","_relevanssi_noindex_reason":"","footnotes":""},"categories":[904,1857,1858,801,802,898],"tags":[],"type-de-post":[438],"hf_cat_post":[],"class_list":["post-317832","post","type-post","status-publish","format-standard","has-post-thumbnail","category-juridico","category-emprender","category-redes-de-franquicias","category-entrepreneurial-story","category-historias-de-emprendedores","category-expert-opinion","type-de-post-articles"],"acf":[],"_links":{"self":[{"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/posts\/317832","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/users\/394"}],"replies":[{"embeddable":true,"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/comments?post=317832"}],"version-history":[{"count":0,"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/posts\/317832\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/media\/317836"}],"wp:attachment":[{"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/media?parent=317832"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/categories?post=317832"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/tags?post=317832"},{"taxonomy":"type-de-post","embeddable":true,"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/type-de-post?post=317832"},{"taxonomy":"hf_cat_post","embeddable":true,"href":"https:\/\/feb26.lexpress-franchise.com\/en\/wp-json\/wp\/v2\/hf_cat_post?post=317832"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}