What Is an Approved Franchise Lending Panel and How Does It Affect Finance?
Updated: Sep 17
An approved franchise lending panel may indicate that a lender is familiar with a franchise system, but it does not guarantee finance for an individual buyer.
This can lead to greater lending appetite, a more streamlined assessment and potentially higher levels of business-backed finance. However, panel status does not guarantee loan approval. The bank must still assess the individual borrower, location, transaction, security and ability to repay the loan.
What Is an Approved Franchise Lending Panel?
“Approved panel” is a general industry expression. Depending on the lender, it may instead be called:
an accredited franchise system;
a preferred franchise;
an approved franchise brand; or
a recognised franchise system.
There is no single panel shared by every bank.
Each lender independently decides which franchise systems it will accredit and the lending parameters it is prepared to consider.
A franchise brand may therefore be accredited with one lender but not another. Even where two lenders recognise the same brand, their maximum lending, security requirements and borrower criteria may differ.
What Does a Bank Assess Before Accrediting a Franchise Brand?
Franchise accreditation generally involves assessing the strength and health of the overall franchise system.
A lender may consider:
how long the franchise system has operated;
the number of established locations;
franchise openings, closures and resales;
financial performance across the network;
franchisor financial strength;
brand recognition and market position;
franchisee training and support;
operating systems and controls;
the performance of comparable locations; and
the franchise system’s competitive advantage.
The lender wants to understand whether the franchise model has produced sustainable outcomes across multiple franchisees and whether the franchisor has appropriate systems to support the network.
A well-known brand is not automatically an accredited brand. Lenders undertake their own commercial and credit assessment.
How Can Panel Status Affect Franchise Finance?
When a franchise system is accredited, the lender already has information about the brand, operating model and historical network performance.
Depending on the lender and franchise system, this may result in:
greater lending appetite;
higher loan-to-value or gearing parameters;
more business-backed lending;
less reliance on property security;
access to specialist franchise bankers;
a more consistent assessment process; and
use of network performance data when assessing forecasts.
This can be particularly important for a greenfield franchise, where the proposed location has no historical financial statements of its own.
However, the benefits differ between lenders and franchise systems. Buyers should not assume that panel status automatically provides a particular lending percentage.
Does an Approved Brand Mean the Franchisee Will Be Approved?
Not always. Brand accreditation and borrower approval are two separate decisions.
The bank may be comfortable with the franchise system but decline an individual application because of concerns about:
insufficient buyer contribution;
limited business or management experience;
poor credit history;
an unsuitable location;
unrealistic forecasts;
high rent or occupancy costs;
insufficient working capital;
an unsupported purchase price; or
inadequate debt-servicing capacity.
The franchise brand may strengthen the proposal, but the borrower must still demonstrate that they can operate the business and repay the debt.
An approved brand with a weak borrower or unsuitable site may remain difficult to finance.
Does Panel Status Apply to Existing and Greenfield Franchises?
It may apply to both, but lenders can assess them differently.
When buying an existing franchise, the lender can review the business’s actual sales, expenses and earnings. Panel status provides additional confidence in the franchise system, but the individual business must still justify the purchase price and proposed debt.
For a greenfield franchise (new business), the location has no trading history. The lender may therefore place greater weight on:
the performance of comparable franchise locations;
the quality of the proposed site;
franchisor support;
fit-out and establishment costs;
cash-flow forecasts;
the buyer’s experience; and
working capital during the start-up period.
An accredited franchise system can help support the application, but it does not remove the risks associated with opening a new location.
What if the Franchise Brand Is Not on the Bank’s Panel?
A franchise that is not accredited may still be financeable.
Possible pathways include:
applying under the lender’s ordinary business-lending policy;
considering another lender that already recognises the brand;
contributing more buyer equity;
using property security;
financing vehicles and equipment separately;
approaching a specialist or non-bank lender; or
asking whether the lender would consider reviewing the franchise system.
A lender may be willing to assess a new franchise brand for accreditation, particularly where there is a genuine transaction and the franchisor is prepared to provide detailed network information.
However, accreditation is a system-level review rather than a simple addition to a list. It can take time, requires the franchisor’s cooperation and may not be completed within the buyer’s transaction deadline.
What Should You Check Before Committing to a Franchise?
Before signing an unconditional franchise agreement, business sale agreement or lease, a prospective franchisee should understand:
whether the brand is accredited with any suitable lenders;
whether accreditation covers existing and greenfield locations;
the likely buyer contribution;
whether property security may be required;
how equipment, fit-out and working capital could be funded;
whether the proposed location satisfies lender requirements; and
whether the business can support the proposed debt.
Panel status is useful, but it is only one part of the finance assessment.
What panel status may and may not indicate
A lender may have completed preliminary work on a franchise system or developed internal guidance for assessing it. That familiarity can reduce some system-level uncertainty, but the scope and currency of any panel arrangement can change.
The individual application still needs to stand on its own. The lender may examine the buyer's experience, contribution, liquidity, proposed site or existing outlet, lease, forecast or historical earnings and total repayment capacity.
Questions a franchise buyer should investigate
Which lenders currently recognise the system, and for what transaction types?
Does the treatment differ between a new site and an existing outlet?
What contribution, security and working-capital evidence may be required?
Does the lender need franchisor approval or particular documents?
How are fit-out, equipment, franchise fees and ongoing royalties treated?
What happens if the lender changes its policy before settlement?
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Frequently asked questions
Does panel status guarantee franchise finance approval?
No. Approval remains subject to the buyer, transaction, lender policy, verification, security and repayment capacity.
Can a franchise be financed if it is not on a lender panel?
It may still be considered, but the lender may require more information or assess the system and application differently.
Does panel status apply to every site?
Not necessarily. A lender may distinguish between new sites, existing businesses, locations, formats and transaction sizes.
Should a buyer rely only on panel status?
No. Independent legal, accounting and commercial due diligence remains important, regardless of lender familiarity.
Considering Buying a Franchise?
Discuss the franchise system, buyer position and proposed funding structure.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
