How to obtain loan approval for an investment in franchising

Starting Position for Franchisees

Since 2013, regulations set by the Basel Committee of the Bank for International Settlements (BIS) have prompted German banks to take a more cautious approach when granting loans. Today, banks place greater emphasis on estimated risk factors such as credit defaults and market volatility, which has made it increasingly challenging to secure financing for investment-ready ventures. As a prospective franchisee, careful preparation is therefore essential to obtain the necessary capital for your franchise plans.

A solid foundation for your negotiations with financial institutions consists of a set of documents that should be compiled or requested before your initial meeting. At the heart of this preparation is your business plan, which outlines the concept, projected development, and financial potential of your investment. This roadmap gives banks an early insight into your ambitions as a franchisee— and the more thoroughly your plan anticipates future scenarios and presents viable solutions, the more confidence lenders are likely to place in your venture.

Other supporting documents that can help convince the bank—provided they do not contain additional risk factors such as previous insolvencies or legal issues—include your CV, a personal financial statement, and any relevant references such as certificates from training programs or university degrees. In many cases, a credit report (e.g. Schufa) will also be required.

Your Competence as a Franchisee Is What Counts

Loan negotiations go far beyond what’s on paper: since you’re typically invited to a face-to-face meeting with the bank, the personal impression you make on the bank’s representatives can significantly impact the outcome of your application. A professional demeanor, strong communication skills, and a solid understanding of the industry you’re investing in demonstrate that you’re well-prepared to take on your future role as an independent franchisee.

Showing the courage to actively negotiate during the meeting can also work in your favor. Not only might this lead to better loan terms, but it also signals to the bank that you possess negotiation skills and a sound economic mindset—qualities that give lenders confidence in your business success and lower the perceived credit risk.

Franchisee Benefit: Support from the Franchisor During Loan Negotiations

Compared to traditional self-employment, franchising offers a key advantage when it comes to securing external financing: you can count on support from your franchisor. For your loan negotiations, the franchisor provides you with additional persuasive materials—such as benchmark data from an already successful business within the franchise system. This helps build the lender’s trust in the overall franchise concept, which can significantly improve your chances of loan approval. Furthermore, the credibility of the financial projections in your business plan can be more easily validated when compared against these proven figures.

Franchise Loans: Possible Even Without Collateral?

In fact, for franchisee investments, there are several financing options available that can enable loan approval without requiring major collateral—though it is still commonly requested. To bypass this requirement, you might engage a guarantee bank that assumes liability for your loan in exchange for a premium interest rate. Similarly, third-party guarantees or liability waivers—though typically associated with added costs—can serve the same purpose. You may also explore government-backed support programs for entrepreneurs, some of which do not require collateral at all.

If collateral becomes unavoidable, banks are most persuaded by assets that are quickly liquidated, such as cash deposits, building society savings contracts, or life insurance policies with surrender value. Tangible assets like real estate, vehicles, or equipment are less ideal from a bank’s perspective, as they involve additional transactional effort and often do not count toward the full market value.

Are you interested in self-employment through a real estate franchise and looking for a franchisor that combines top-tier services, international prestige, and outstanding franchisee support? With Engel & Völkers, you’ve found the right partner for a strong and ambitious franchise journey. We’re happy to answer your questions and provide further details—get in touch with us today!