Great Ways to Cut the Cost of Starting Your Franchise Business
Great Ways to Cut the Cost of Starting Your Franchise Business
Options for Financing Your Franchise
Many franchise opportunities come with a sizeable price tag. Few prospective business owners can afford to make such an investment without some financial assistance. Unfortunately, not all of them will have access to the necessary capital it will take to satisfy start-up costs, franchise fees, royalty fees and a loss in revenue that will continue until the return on investment finally begins. If you have a well-established credit history (free of bankruptcies and established to the point where you’re considered as having enough credit), you may be able to get a conventional loan through a bank or credit union.
However, banks are typically reluctant when lending to small businesses. In reality, they rarely do so. Though not everyone will qualify for conventional loans, there are still options. If you have applied for credit to no avail, you can contact the Small Business Administration, an agency run by the federal government. The SBA guarantees a certain percentage of its loans, which puts lenders at ease because they are less likely to experience a loss. Plus, the SBA is usually willing to lend for longer periods of time and at larger amounts.
Of course, the SBA has specific criteria to determine eligibility. First, it must be a small business, which translates to less than $13.5 million in retail or service sales. Additionally, it must be located in the United States or a U.S. governed territory and only those interested in opening a for-profit business can apply. As you can imagine, this agency reviews countless applications, which means that you must handle yourself in a very professional manner. It is always a good idea to have your business plan ready before meeting with anyone regarding financial assistance, even a government agency.
However, the main disadvantage to getting an SBA loan is that the interest rate is set by the Treasury Department, which means that it is variable. Moreover, this interest rate is generally higher than those offered by conventional loans. Thus, if you can find a close friend or family member who is able and willing to lend you the necessary funds or even cosign, this is your best option next to financing on your own through a bank.
Economic Development Corporations
The federal government is not the only entity that provides monetary assistance to potential franchise owners. More and more state and county governments are pitching in with tax exemptions and other special programs. The New York City EDC, for instance, issues low-cost tax exempt bonds as well as double and triple tax exempt revenue bonds (these are technically issued by the New York City Industrial Development Agency, NYCIDA, an entity of the NYCEDC). Furthermore, this agency can even administer public loans. The only issue to consider before accepting assistance from an EDC is the fact that much of the available funding is dedicated to improving low-income or developing areas. Nonetheless, EDCs have funds available to prospective business owners like you. And, you have the opportunity to impact a struggling community. Still, before you decide to locate your franchise in such a community, make sure it is conducive to operating a profitable company.
Community Development Corporations
These non-profit organizations are dedicated to improving their local economies by lending money to small businesses. The goal here is to increase revenue and bring new jobs to the area. What’s more, CDCs are well known for developing affordable housing and improving education for residents in low-income areas. Once again, you must weigh the costs and benefits to starting a business in developing or otherwise lower income sections of a town or city.
Business Development Corporations and Venture Capitalists
If you’re weary of relying on public funding, you have the option of appealing to a business development corporation or venture capitalist in your territory. Returning once again to New York, its business development corporation is made up of financial institutions that pool their resources in order to lessen the risk. Rather than focusing on low-income sections of the state, this organization is devoted to helping all kinds of different businesses gain access to financing. The primary concern is to expand New York State in general.
Venture capitalists, on the other hand, are different from development corporations because they assume some ownership of your business. Because of this unique feature, they are willing to take more risks than traditional lending institutions. Depending on your specific industry and the stage of your business’s development, you may be able to find a venture capitalist fund to help finance your business.
Take Your Time
While there are opportunities for financing your franchise business and dramatically reducing your initial cost, keep in mind that some franchisees use their own resources for as much as 50 percent of their start-up expense. If you can not afford that kind of investment, consider working for a couple of years and saving some of the money for yourself. If you’re able to generate some revenue this way, you are more likely to qualify for a conventional loan. Otherwise, you will appear more serious to business development corporations and reputable venture capitalists. Thus, if you decide to wait after all, don’t become discouraged. Instead, use the extra time to conduct additional research and perfect your business plan. Sooner than you realize, investors will be eager to take part in your project.
Great Ways to Cut the Cost of Starting Your Franchise Business - To learn more about this author, visit Candice Clem's Website.
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Free Download - 5 Myths About Buying A Vending Franchise Business By Candice Clem |
One of the reasons a franchise business has such a high potential for success is because of all that’s included in the initial cost. In some cases, the start-up cost is the same (or very close) to building a business from scratch but without all the benefits such as established name recognition, target market research and existing publicity campaigns. With so many advantages, it can be difficult to understand why entrepreneurs choose to launch a business alone. Nevertheless, some of the high costs associated with franchises can become a deterrent for prospective buyers. What many of them don’t realize is that there are several options that help cut the cost.
Options for Financing Your Franchise
Many franchise opportunities come with a sizeable price tag. Few prospective business owners can afford to make such an investment without some financial assistance. Unfortunately, not all of them will have access to the necessary capital it will take to satisfy start-up costs, franchise fees, royalty fees and a loss in revenue that will continue until the return on investment finally begins. If you have a well-established credit history (free of bankruptcies and established to the point where you’re considered as having enough credit), you may be able to get a conventional loan through a bank or credit union.
However, banks are typically reluctant when lending to small businesses. In reality, they rarely do so. Though not everyone will qualify for conventional loans, there are still options. If you have applied for credit to no avail, you can contact the Small Business Administration, an agency run by the federal government. The SBA guarantees a certain percentage of its loans, which puts lenders at ease because they are less likely to experience a loss. Plus, the SBA is usually willing to lend for longer periods of time and at larger amounts.
Of course, the SBA has specific criteria to determine eligibility. First, it must be a small business, which translates to less than $13.5 million in retail or service sales. Additionally, it must be located in the United States or a U.S. governed territory and only those interested in opening a for-profit business can apply. As you can imagine, this agency reviews countless applications, which means that you must handle yourself in a very professional manner. It is always a good idea to have your business plan ready before meeting with anyone regarding financial assistance, even a government agency.
However, the main disadvantage to getting an SBA loan is that the interest rate is set by the Treasury Department, which means that it is variable. Moreover, this interest rate is generally higher than those offered by conventional loans. Thus, if you can find a close friend or family member who is able and willing to lend you the necessary funds or even cosign, this is your best option next to financing on your own through a bank.
Economic Development Corporations
The federal government is not the only entity that provides monetary assistance to potential franchise owners. More and more state and county governments are pitching in with tax exemptions and other special programs. The New York City EDC, for instance, issues low-cost tax exempt bonds as well as double and triple tax exempt revenue bonds (these are technically issued by the New York City Industrial Development Agency, NYCIDA, an entity of the NYCEDC). Furthermore, this agency can even administer public loans. The only issue to consider before accepting assistance from an EDC is the fact that much of the available funding is dedicated to improving low-income or developing areas. Nonetheless, EDCs have funds available to prospective business owners like you. And, you have the opportunity to impact a struggling community. Still, before you decide to locate your franchise in such a community, make sure it is conducive to operating a profitable company.
Community Development Corporations
These non-profit organizations are dedicated to improving their local economies by lending money to small businesses. The goal here is to increase revenue and bring new jobs to the area. What’s more, CDCs are well known for developing affordable housing and improving education for residents in low-income areas. Once again, you must weigh the costs and benefits to starting a business in developing or otherwise lower income sections of a town or city.
Business Development Corporations and Venture Capitalists
If you’re weary of relying on public funding, you have the option of appealing to a business development corporation or venture capitalist in your territory. Returning once again to New York, its business development corporation is made up of financial institutions that pool their resources in order to lessen the risk. Rather than focusing on low-income sections of the state, this organization is devoted to helping all kinds of different businesses gain access to financing. The primary concern is to expand New York State in general.
Venture capitalists, on the other hand, are different from development corporations because they assume some ownership of your business. Because of this unique feature, they are willing to take more risks than traditional lending institutions. Depending on your specific industry and the stage of your business’s development, you may be able to find a venture capitalist fund to help finance your business.
Take Your Time
While there are opportunities for financing your franchise business and dramatically reducing your initial cost, keep in mind that some franchisees use their own resources for as much as 50 percent of their start-up expense. If you can not afford that kind of investment, consider working for a couple of years and saving some of the money for yourself. If you’re able to generate some revenue this way, you are more likely to qualify for a conventional loan. Otherwise, you will appear more serious to business development corporations and reputable venture capitalists. Thus, if you decide to wait after all, don’t become discouraged. Instead, use the extra time to conduct additional research and perfect your business plan. Sooner than you realize, investors will be eager to take part in your project.
Great Ways to Cut the Cost of Starting Your Franchise Business - To learn more about this author, visit Candice Clem's Website.
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Dave KurlanDave Kurlan is the founder and CEO of Objective Management Group, Inc., the industry leader in sales assessments and sales force evaluations, and the CEO of David Kurlan & Associates, Inc., a consulting firm specializing in sales force development. Dave has been a top rated speaker at Inc. Magazine's Conference on Growing the Company, the Sales & Marketing Management Conference and the Gazelles Sales & Marketing Summit. He has been featured on radio and TV, including World Business Review with General Norman Schwarzkopf, in Inc. Magazine, Selling Power Magazine, Sales & Marketing Management Magazine and Incentive Magazine. He is the author of Mindless Selling and Baseline Selling – How to Become a Sales Superstar by Using What You Already Know about the Game of Baseball. He created and wrote STAR, a proprietary recruiting process for hiring great salespeople, and he writes Understanding the Sales Force, a popular business Blog and is a contributing author to The Death of 20th Century Selling and 101 Great Ways to Improve Your Life, Volume 2. - Visit Dave Kurlan's Website |
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Kim CastleWith nearly two decades in the advertising and design business, with clients like Domino's Pizza, General Motors, Direct TV, Pedigree, Wolfgang Puck, Higher Octave Music, Hollywood Celebrity Products, Disney, and Paramount, as well as thousands of entrepreneurs around the world define, structure, communicate, and position their business for greater profits, BrandU(R) co-creators Kim Castle and W. Vito Montone discovered that entrepreneurs could experience the same power that big brands command for a fraction of the cost with the world's only process-based results-drive Integral approach to business creation. BrandU(R) is helping entrepreneurs grow with the power of extreme clarity from idea...to brand...to market(TM) and helping one million entrepreneurs become successful and whole so that they can make a difference in the world. Are you one of them? If you want to experience clarity all the way to the bank(TM), get started now at http://www.brandu.com. - Visit Kim Castle's Website |
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Joe DagerJoe Dager is President of Business901, a progressive coaching company providing no-nonsense direction in areas such as Lean Six Sigma Marketing and organized referral marketing. What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joe’s ability to combine his expertise with “out of the box” thinking is unsurpassed. He has always delivered quickly, cost effectively and with ingenuity. A brilliant mind that is always a pleasure to work with.” - James R. If you want to learn more about Business901, start a conversation with us. We can be found @ Web/Blog: Business901.com Web/Blog: FundingYourNonprofit.com LinkedIn Profile Follow me on Twitter - Visit Joe Dager's Website |
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David AchesonDavid Acheson is the founder of DCJA Consultancy. DCJA Consultancy is a management consultancy business specialising in B2B sales consultancy. They offer bespoke and packaged sales consultancy including Sales Optimisation Review, Interim Sales Management, Sales & Marketing Review, 1:1 Sales & Management Staff Analysis, Management Training, Solution Sales Training, Creation of New Pay Plan, KPI's, run Customer Feedback Campaigns, assist with Recruitment, Coaching, Appraisals and set up Strategic Marketing Campaigns. David spent his early career in accountancy and then moved into sales in 1982, working in Office Equipment, IT, Advertising, Training, Outsourcing and Consultancy. He has held many Senior Positions in SMBs and Global Organisations including Head of Sales Operations & Head of Business Development. His knowledge, skills and great experience of the Sales Industry has led to David making keynote speeches and running educational sessions to key businesses through organisations including The Chamber of Commerce and Business Link. - Visit David Acheson's Website |
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Linda RichardsonLinda Richardson is the Founder and Executive Chairwoman of Richardson, a global sales training and performance improvement company. As a recognized leader in the industry, she has won the coveted Stevie Award for Lifetime Achievement in Sales Excellence and she was identified by Training Industry, Inc. as one of the “Top 20 Most Influential Training Professionals.” Ms. Richardson is credited with the movement to Consultative Selling and is the author of ten books on selling and sales management, including Sales Coaching — Making the Great Leap from Sales Manager to Sales Coach, and Stop Telling, Start Selling. She teaches sales and management at the Wharton Graduate School of the University of Pennsylvania and the Wharton Executive Development Center. Linda is a frequent speaker at industry and client conferences, has been published extensively in industry and training journals, and has been featured in numerous publications, including The Wall Street Journal, Forbes, Nation’s Business, Selling Power, Success, and The Conference Board Magazine. Learn more about Richardson's sales training and performance improvement solutions at http://www.richardson.com web - Visit Linda Richardson's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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