If you want to own your own business but don’t know how to get started, you may be interested in franchising. This is a great way to start with many business tools at your disposal. When it comes to financing, however, you need to know the types of franchise funding available to you and how to get it.
Have a Business Plan
In order to get franchise financing, you need to have a solid business plan. Even franchisees need a business plan. You already know your net worth and your credit rating. If you want to approach a lender, you have to have a plan for them to look at. The truth is that a well thought out business plan might make all of the difference when it comes to a loan application. Your plan should include an accurate projection and a marketing plan that makes sense. Be realistic and if you don’t know how to write a business plan, consult with professionals who do.
Look into Franchisor Financing
Traditionally, a franchisee will look to the franchisor for financing. Most franchisors provide some debt financing. Some might carry a loan or fraction of it by their finance company. However, a lot of franchisor financing is limited. While you still have to pay start-up costs, some franchisors will offer financing for a portion of that cost. They may even have plans in place for financing equipment, operational costs and other fees.
Try Other Financing Options
Once you know what the franchisor will offer you, it’s time to look into other options. Create a list of all other forms of franchise funding available to you. You may look into bank loans, SBA loans, finance companies and many other options. If a bank doesn’t want to work with you because of your financial profile, then your best option is to look into SBA lending. The SBA guarantees up to 90 percent of the loan value. This makes you less of a risk to finance companies.
You may also consider taking out a home equity line of credit or second mortgage. Now, you do want to take extra care with this type of financing. Your loan will be secured by your home. This means that if you default on the loan for whatever reason, you are at risk of losing your property.
Many people who dream of owning their own business go into franchises instead. This is a great way to have your own business, with the tools available for you to make succeed. Now, when it comes to starting a franchise, there are costs. This is why it’s important that you know the franchise funding options available to you.