Often lenders for franchises will use the term EBITA.
What does EBITA mean?
EBITA is short for earnings before interest, tax and amortisation. The reason it is popular in commerial financing is it gives the lender an indication as how much cash is available to repay the loan principal and interest.
It is a popular measurement as it can be measured fairly simply.
However be aware EBITA is different to free cash flow in that excludes the cash needed to replace capital assets (capex)
The multiples for the EBITA are normally assessed over the last 12 months financial statements.
If you are purchasing an existing franchise the EBITA allowed for existing stores may be somewhere between one times to two times EBITA. This may then be capped between 50% to 70% of the purchase price.
All of the above is a guide only. Please call us if you would like more guidance.
Here is a guide as to what a bank may lend on a particular franchise*.
For these commercial loans the security taken is over the franchise.
It is a guide only as these parameters are constantly changing:-
7-Eleven 60% to 70%
Athletes Foot 40% to 60%
Autobarn 40% to 60%
Bakers Delight 50% to 70%
Bed Shed 30% to 50%
Chicken Treat 40% to 60%
Dairy Farmers 40% to 60%
Domino’s Up to 70%
Eagle Boys 40% to 60%
Gloria Jeans 40% to 70%
Grill’d 30% to 50%
Hogs Breath Café Up to 40%
Kwik Kopy 30% to 50%
Mortgage Choice Up to 60%
Nandos Up to 50%
Noodle Box 30% to 50%
Poolwerx 30% to 50%
Red Rooster 40% to 60%
Subway 40% to 60%
* Please note, conditions apply. LVR’s and systems may differ from time to time and on a case by case basis.
A lender reserves the right to request additional security where deemed necessary.