8. Looking to get funding for
your business, but not sure
which is the right solution for
you?
Here are your funding
options:
9. Franchisors
Your franchisor is a good first stop. Ask
them for recommendation. They may
have agreements with lenders to not only
approve a loan, but to shorten the process
and help you open sooner. Check for this
in the Franchise Disclosure Document or
ask directly.
10. Cash
Of course, using your own cash to buy the
franchise will create a debt-free business.
However, if you are looking at being a
multi-unit operator, that may not be the
best strategy, as you will need your cash
for growth.
is king.
11. Conventional loans are usually limited to
existing business owners seeking unit
expansion, or new owners with very
specific direct experience. In addition,
lenders are looking for collateral in real
estate that can be attached to mitigate
their risk. Terms generally run 5-10 years.
Conventional Loan
12. For those whose homes have retained
their value and who own or have a
significant percentage of equity in their
home, this time-tested source of business
start-up funding is still a good alternative.
You may have to go through more
paperwork than you would have a few
years ago, but you still can use your home
as collateral – that is, if you’re willing.
Home Equity
13. If you have a 401(k) or other retirement
fund, you can create a C corporation
that can be used to buy stock in your
new franchise business, thus funding it. Be
aware that the IRS rules on this are under
scrutiny, but companies specializing in
this area have been around for years and
have helped many franchisees get
started.
Retirement Plans
14. Small Business Administration loans are one of the most
common forms of financing for a franchise. These loans are
designed to mitigate lenders risk by offering a guarantee
on the principal of the loan from our federal government.
SBA Loans
SBA loans are very cumbersome to
apply for, and require personal
guarantees and mortgages to be
placed on your properties, so make
sure you get professional help when
applying for an SBA loan.
15. Finding a source for funding your equipment purchase or lease
will increase your chances of finding money for the rest of your
new business. At the very least, it will reduce the amount you
need from other lenders. Check with your franchisor to see if
they have any deals with one or more equipment leasing and
financing sources.
Equipment Leasing