Explore Your Financing Options
When considering your franchise ownership options, you should first decide how much money to invest in a new business. Most franchises require some amount of cash down when a new franchisee plans to purchase a business. Regardless of total investment, some franchisors require that prospective franchisees possess a large amount of available cash, while others require less liquid capital to cover the initial investment. Unless you have enough cash to completely cover the initial investment, you will definitely need to find a source of funding in order to purchase your franchise.
Many franchises offer discounts to women, minorities and veterans and some also offer in-house financing.
Buy within Your Budget
Debt should not be taken lightly, particularly in this economic environment. Franchises tend to have a higher success rate in comparison to start-up businesses, but there will still be risk involved in purchasing your franchise. Start your business search by determining how much liquid capital you have available. The less you have to finance, the quicker and smoother your business buying experience will be.
Businesses Are Available in a Wide Range of Investment Levels
You might be surprised by the wide range of investment levels at which businesses are available. Many factors influence initial investment levels, from how much overhead and inventory you’ll need to get started to whether the business can be run from home, a vehicle, or a storefront. If you’ve always dreamed of owning a café, explore your options in this category. If you do not have an industry in mind, keep your options open and search by your available liquid capital to see what businesses might be available in your price range. A qualified franchise consultant can be very helpful to you in finding the right type of business at an investment level you can afford.
Finding Funding that Works for You
If you do require financing for your new business, you have options. These range from bank loans, which are more difficult to get approval for these days, to a variety of non-traditional forms of financing. Additionally, if you cannot get financing but you want to pursue your dream of business ownership, consider asking friends and family to invest in your business or find a business partner who might be willing to invest in your new business and act as a silent partner.
Some Franchisors Offer Their Own Financing Programs
Some franchisors offer their own in-house financing programs, or they have partnerships with a particular lending company. The lending company is familiar with their concept and convinced of the validity of the brand, therefore it may be easier to gain funding from a partner company. If a franchisor doesn’t offer financing and borrowing the money from friends and family is not an option, you can explore the range of financing options available…
• Traditional Financing
You can get a loan from many banks. You must have a good credit rating, some liquid capital available, and a strong business plan, as banks tend to be conservative in whom they award business loans to. With that said, bank interest rates tend to be competitive. Some franchisors will help you prepare your business plan so it reads well and is convincing.
• SBA-Backed Financing
The Small Business Administration (SBA) offers SBA-backed loans. These extremely popular business loans can be obtained by many individuals who do not qualify for traditional financing options. These loans have been pre-screened by the SBA and this screening process makes it easier to gain financing.
• Investing Your Retirement Funds in a Business
There are several innovative companies that will roll your 401K or other retirement plan into a business loan. There are no penalties associated with this type of retirement fund conversion. This type of loan enables you to invest in a business without mortgaging your home or using your property as collateral.
• Home Equity or 2nd Mortgages
If you feel comfortable and confident in your decision to purchase a business and own enough of your home to take out a home equity line of credit or second mortgage, this option can be a simple way to obtain the necessary cash to finance a business. You will not need a business plan to obtain this type of finding.
• Other Sources of Non-Traditional Financing
With the popularity of business ownership increasing, there are more and more financing options available to meet your needs and preferences. For example, with solid credit, you may be able to obtain a business loan almost instantly and online. Additionally, there are smaller private lenders and brokers that can work with you if you’d like more personalized service.
Jack Kuykendall can be reached at www.FranchiseGuidepost.com Office 909 980 0698 E-Mail: JackKuykendall@msn.com