Financing Your Franchise Investment
Author: Santos Jarvis
Author: Santos JarvisBusiness ownership can be one of the most financially rewarding investments you make. It can also be one of the riskiest. By choosing to invest into franchise ownership, rather than starting up a private, independent business, you significantly increase your chances of success.
However, franchise ownership can be notably more costly than independent ownership. Though the cost is certainly worth it both in terms of security and potential return on investment, financing a franchise can be an ordeal in and of itself. Where does a hopeful investor turn to raise the capital need to start his entrepreneurial endeavor?
Personal Assets
Obviously, you want to raise as much of the capital as you can on your own. The more you put up yourself, the less beholden you are and the more positive the start of your business. So before you get started, take stock of what you have to offer.
If you haven't already hired an accountant, now is the time to do so. A good accountant can advise you of options you may have not considered. If you have equity in your home that you can borrow against, then you are off to a good start. Look into your other assets as well. It is possible to create a C corporation from your 401k or other retirement funds.
Co-Investors
If you feel comfortable with the idea, then you might want to consider soliciting for investors within your business and social networks. Friends, family and associates can often be surprised in the level of support they are willing to give to someone who has a history of good business sense and the drive to succeed in business. Don't let shyness stop you from achieving your dream of business ownership.
Funding Through the Franchisor
As lending has tightened, due to the economic crisis, more and more franchising companies are beginning to offer incentives and financial backing for those looking to invest in franchise ownership. Though this additional financial dependence on the franchisor is far from ideal for most owners, it may provide a means of ownership for those who simply cannot raise capital through other methods. As such, make sure you are aware of what options your intended franchisor options for those looking to become owners.
Other Loan Resources
Just because lending has become more restricted doesn't mean that a traditional business loan is unobtainable. Banks are lending less, but are still lending. In addition to the traditional lenders, an increasing number of alternative lenders have also begun to make loans available in the gap created by the banking industry.
If your business is backed by the Small Business Association and their loan backing guarantee, then you stand a much higher chance of getting a traditional loan. If you haven't settled on a franchisor yet, but know that you will need a loan once you do, you might wish to narrow your search to those on the SBA Franchise Registry. Having a SBA backed franchisor will put you in a much better position when it comes time to apply for that loan.
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filtafryAbout the Author:
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