Learn how franchise lending works in New Zealand, what lenders assess and how to prepare a strong application to fund your franchise purchase or expansion.
At a glance
- Getting finance to buy a franchise works differently from a standard small business loan because lenders assess both your financial position and the strength of the franchise system you’re joining.
- A strong application demonstrates a clear business plan, robust cash flow forecasts and a full understanding of every cost involved in setting up or purchasing the franchise.
- Successful franchise lending applications usually include a detailed funding table, clarity around your equity contribution and choosing a lender that aligns with the brand and the scale of the franchise.
Lenders typically review more than just your credit history when assessing a franchise loan application. Because franchise lending involves shared risk between the borrower and the franchisor, lenders often require documentation that demonstrates the viability of both parties. Preparing these upfront can reduce delays and strengthen your application.
The franchise agreement
This document outlines the conditions you operate under, such as term length, renewal rights and ongoing fees. Lenders use the agreement to ensure the proposed loan term aligns with the franchise tenure and any associated lease. Applications are often declined when loan terms exceed franchise rights, so ensuring these periods match is essential.
Business plan and cash flow forecasts
Lenders need clear and well-supported financial projections. Many applicants underestimate the time it takes for a new franchise to reach steady trading levels or rely on vague assumptions without evidence.
In strong applications, forecasts reflect:
- The expected ramp-up period
- Seasonal fluctuations in the New Zealand market
- Benchmark data supplied by the franchisor
- Historical performance, if purchasing an existing franchise
A well-prepared plan shows the lender you understand the commercial environment and have realistic expectations.
Understanding the costs of buying a franchise
It’s common for new buyers to focus on the headline purchase price, but in franchise lending the total cost of entry is far more important. Lenders want reassurance that all expenses have been accounted for and that your funding request is sufficient to cover the full setup phase.
The hidden costs that catch borrowers out
Many first-time buyers overlook costs that don’t appear in promotional brochures. Training requirements, fit-out compliance, equipment upgrades and working capital can materially impact your funding needs.
Thoroughly calculating these costs helps ensure the franchise loan amount is accurate. Falling short of capital during the early stages is one of the most common reasons franchise operations struggle to gain traction.
| ✔️ | Checklist: Have you factored in these costs? |
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Franchise fee – The upfront cost to join the system.
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Training fees – Mandatory courses for you and your staff.
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Lease bonds – Bank guarantees often required by landlords (3-6 months’ rent).
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Fit-out & equipment – Refurbishment costs or new machinery to meet brand standards.
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Legal & accounting fees – For reviewing the franchise agreement.
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Working capital – 3 months of operating expenses (wages, rent, stock) to cover the ramp-up phase.
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How to prepare for a successful franchise loan application
Securing approval comes down to preparation and demonstrating that you’ve thought through every financial element of the business. Lenders in New Zealand typically want to see that you are contributing your own funds, understand the cash flow cycle and have a strong plan for how the borrowed capital will be used.
1. Build a detailed funding table
Before approaching a lender, create a breakdown showing exactly where each dollar will go. This shows you’ve done your due diligence and helps lenders understand the structure of your investment.
A well-constructed table includes the full project cost and how much of it is coming from your own equity versus the franchise loan.
Example: Funding Table
| Uses of Funds (Costs) | Amount | Sources of Funds (Capital) | Amount |
|---|---|---|---|
| Purchase Price | $120,000 | Personal Savings (Equity) | $60,000 |
| Fit-out & Signage | $40,000 | Business Loan (Required) | $120,000 |
| Training & Stock | $20,000 | ||
| Working Capital | $20,000 | ||
| Total Project Cost | $180,000 | Total Funding | $180,000 |
2. Understand your equity contribution
Many traditional lenders expect buyers to contribute a portion of the upfront investment. While exact ratios vary, it’s common for lenders to fund only part of the project, requiring you to supply the remainder.
Borrowers with strong financial histories or those buying into well-established brands may secure higher leverage, whereas new or smaller franchise systems often require greater equity from the applicant.
3. Select a lender aligned with your franchise
Large lenders may focus on franchise networks with long trading histories, extensive data and strong brand recognition. For emerging or medium-sized franchises, or where buyers cannot meet the required deposit, alternative lending solutions may offer greater flexibility.
Choosing a lender familiar with franchise lending can reduce friction during the approval process and ensure the loan structure matches the franchise model. When you’re ready to explore funding options that support your goals without tying up personal assets, learn more about Prospa business lending solutions.
