How to prepare for bank accreditation

With access to finance a recurring theme in the franchise sector, the importance of a bank accreditation has never been more important.

Bank accreditations promote connections to dedicated specialist bankers that are able to provide more loans on better terms and in shorter timeframes; a very attractive proposition indeed for franchise brands and their franchisees.

However, with most banks having less than 50 brands accredited, the queue for accreditation can be a long and frustrating one.

A few basic steps that can be taken to improve the chances of accreditation include:

Step one

Make the right connection. Use your industry networks to find out which banks are actively trying to grow their franchise lending book exposure and then make direct contact with the person responsible for executing the strategy.

Step two

Identify what the bank is really looking for in accredited brands. Don’t confuse pre-requisites such as length of time franchising, number of units etc. with the real issues of what makes a franchise brand attractive to the bank. This will generally include good business development opportunities, sound loan quality and a strong franchisor.

A strong brand from a bank’s perspective has the following:

  • An established and respected business model and product offering
  • A solid financial position (sound earnings, profitability, regained earnings and liquidity)
  • Management (experienced, stable, track record of strategic success)
  • People (satisfied and engaged franchisees, head office and support staff)
  • Effective franchisee recruitment (disciplined growth, low churn rates, proven process or approach to recruiting quality franchisees)
  • Effective site selection
  • Well trained and well supported franchisees

For a lender the ultimate evidence of a strong brand will be how few units become problem loans and what the franchisor can and does do support any that do become a concern for their lender.

Step three

Provide the right information. Ensure that all requested information is provided in a prompt,complete and balanced manner. Lenders do not expect everything to be perfect. Holding back or avoiding certain information will only create doubt. Conversely, demonstrating an ability to identify and address problems as well as outlining strengths increases a lenders confidence in the future.

Step four

Focus on being lender friendly. Many new and emerging brands do not yet meet standing bank accreditation criteria. Instead of being discouraged their focus should turn to increasing their chances of early accreditation by building their reputation as a lender friendly brand.

Whilst bank accreditation remains an ongoing challenge, brands that are well prepared and pro-active are improving their chances of achieving and maintaining this key point of differentiation.