Franchise Financing - Finding the Money
The cost of buying a franchise can be substantial, but you don't have to be a trust fund baby to get into the franchise of your dreams. Where is the funding going to come from? That's the number one question franchise buyers ask. There are numerous sources of capital, but start with these basic steps first.
- Talk to the franchisor. About one in three franchisors provide franchise
financing directly or have arrangements with third party lenders. You will
find any financing arrangements spelled out in Item 10 of the FDD (Franchise
Disclosure Document). Even if the franchisor doesn't have money to offer, it
is still the best source of information about your financing options.
- Look within. It is a common misconception that you can or should borrow
all the money to open a franchise. Be prepared to come up with at least 25 to
30 percent of the total start-up costs. To assess personal resources, start by
preparing a personal financial statement (you'll need one to present to
- Ask family and friends. This is one of the most common ways to finance a
franchise. After all, who knows your dreams and capabilities better? Plus,
they want to help you succeed.
- Call your accountant. Ask your accountant to recommend a banker. A good
accountant - one with small business experience - is usually a great source of
- Find a specialist. You should start at the bank where you do your personal
banking, but there's a good chance you won't get what you need there. Local
banks are often unable to fund franchise projects. Your chances will be much
better with independent lenders like GE Capital Franchise Finance that
specialize in franchise lending.
- Search the SBA Franchise Registry
(www.franchiseregistry.com). The SBA's
small business lending guarantee program is a key source of loans. This
program for new franchise buyers is much easier to access since the creation
of the Franchise Registry, a central database of information about franchisors
that have been certified by the SBA.
4 Signs a Franchisor May Not Be Around for the Long Haul
A critical part of the due diligence process for prospective franchisees is trying to discern (to the extent reasonably possible) whether the franchisor will be around for the long haul. After all, much of what you pay for in a franchise opportunity is the right to be associated with the franchisor’s brand and system, the right to use the franchisor’s proprietary materials, and in some cases, the right to an exclusive territory. If the franchisor goes out of business, all of these rights go up in the air (if not out the window), and you may well be left in a worse position than if you had just gone into business on your own in the first place.
10 Business Opportunities for Under $25K
Here’s just a snapshot of a few of those options that are available.
Why Are Other People Opening Franchises? And Why Should I?
This came as a little bit of a surprise to me.but at the end of the day it makes sense. Franchises might be a good opportunity for people to make a change in their lives, but at the end of the day they are a major investment. And as with all major investments you’re probably making it with the intention of making money. So if you are thinking of opening your own franchise to make more money, have more flexibility, or have a more fulfilling career you’re not alone.