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Small Industries Development Bank of India (SIDBI) and Franchise India today joined hands to cater to the funding needs of the franchise business model in the country.
"The programme has been instituted as a funding initiative to make the franchising model of business less daunting and more attractive for aspiring entrepreneurs in the country," SIDBI and Franchise India said in a joint statement.
It aims to make financial support to emerging and established franchisers in the country, it said.
"It is an industry in which financing is very difficult because by and large the franchisees are not able to offer collateral... The intention is to devise a product which is based not essentially on the collateral but on the cash flows," said N K Maini, Managing Director, SIDBI.
He said the bank will work in collaboration with franchisers to find potential franchisees to strengthen the ecosystem for this kind of business model in the country.
"Right now, we are in the process of piloting these products. In the next six months, we expect we would have gone through the pilot phase of the product. After that we will decide what is the quantum of finance that will be required for funding this industry," Maini said.
Currently, the franchising industry in the country is about 1.7% of the GDP and is expected to grow to about 4% within the next three to four years, he added.
In developed countries, the figures are much higher. So, this is an industry which is going to grow, he said.
"We hope the tie-up with SIDBI will make this segment even more attractive with solid financing models and products for entrepreneurs to rely on," said Gaurav Marya, Chairman, Franchise India, a franchise and retail solution provider.
The loan to franchisee will be given on market determined interest rate at an average of about 10-14%, Maini added.
