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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.

  1. 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.
  2. 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 lenders anyway).
  3. 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.
  4. Call your accountant. Ask your accountant to recommend a banker. A good accountant - one with small business experience - is usually a great source of leads.
  5. 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.
  6. 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.

Interview with First Choice Business Brokers Franchisor Richard Giannini

Richard Giannini: FCBB was in existence as a single location for 12 years prior to franchising in 2006. The infancy of the industry and the massive demand that we saw coming from the Baby Boomers retiring and thecultural changes happening in the world (especially regarding childrenno longer taking over the family business in European nations) were just some of the opportunities we saw. Growing the business exponentially through franchising was a way we could see us achieving the vision of becoming a world-wide brokerage firm.

The Best Home-Based Franchise Opportunities in the USA

Other major advantages of home-based franchise opportunities are low start-up costs and overhead expenses.The initial investment required for an at-home franchise is typically much lower than a conventional franchise, often in the $15,000-$30,000 range. Some home-based businesses can be started with just $10,000. Since franchisees do not need commercial space, work-from-home franchises also have low overhead costs and require little to no inventory.