The path to franchise ownership demands strategic thinking
from the beginning. Signing on the dotted line isn't always as
easy as raising a pen. Diligent assessment and comparisons need
to be done well before the grand opening. Confronting the
financial products available entails creativity and cold logic.
Starting a new business is an emotionally charged situation, but
the key to choosing the appropriate financing is in assessing the
numbers without sentiment.
Potential franchisees have an ace up their sleeves when it
comes to loan approvals; a ready made business plan with a
history of success is a convincing asset to any lender assessing
investment risk. Once you are armed with an inventory of your net
worth, you're ready to consider the loan options.
Cash allows you to remain debt free, which leaves you in an
excellent position when starting a franchise. Managing a new
endeavor with a sense of security is certainly of benefit, but
sometimes cash is not king. Those who plan to become multi-unit
operators will need to have cash on hand to funnel into business
growth. Choose cash as an option only after you've drafted your
personal business plan and assessed item five in the Franchise
Conventional loans can limit franchisees who plan to expand.
Lenders require fixed assets as collateral to reduce risk. Fixed
or floating interest rates are popular for business owners
because they are highly adaptive to lenders with high credit
scores. Quarterly or annual payments can be arranged and, for
some, interest-only structures can be implemented.
SBA loans are attractive because they offer small business
owners a significant amount of capital. The fact that they are
guaranteed by the federal government reduces risk and when
property is a part of the business structure, a portion of the
loan is government funded. These are set off by the cumbersome
application process involved.
Franchises rarely offer financing and when they do, the terms
can be less attractive than franchisees could access
independently. Product comparisons will determine whether these
are worth applying for.
Online loan aggregators have recently entered the finance
market and some are affiliated with specific franchises. Their
role is to pair lenders with financers, usually by handling
application processes and comparisons, allowing franchisees to do
multiple applications simultaneously. They usually don't charge
service fees and they often offer advice. The products offered
are sometimes limited by a low number of associated lenders and
Self directed retirement plans could be used as partners in a
franchise if the requirements are met. The application process is
speedy but exacting, so it's best to navigate this option with
the advice of an industry leader. IFA Supplier Forum members are
specialists in the field and can be accessed through their
Fixed assets required for the franchise are often easier to
access through leasing. Their terms vary as widely as all
financial products do, so homework needs to be done meticulously.
Investing in an appreciating asset using debt makes economical
sense when the terms are affordable. It's unnecessary to select
only one method. Instead, a creative approach that tacks several
products together as part of a greater strategic whole is often
easier to personalize. Contact Franchise Expo for recent
opportunities in the vibrant industry of franchising.
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