How To Find Financing For Your Small Business Franchise
How To Find Financing For Your Small Business Franchise
Assuming you don’t have hundreds of thousands of dollars tucked away somewhere that you’re going to use to start your franchise, a small business loan is going to be the most common form of financing for your franchise. The good news about getting a loan from a bank is that most banks and lenders will be more willing to award loans to small business franchises than to other types of small businesses simply because facts show that small business franchises are more likely to succeed. While there are no guarantees in any business, statistics have shown that over the course of ten years, non-franchise small business opportunities see a paltry success rate of less than 20% while small business franchises succeed 92% of the time. Banks and lenders are all about numbers and statistics, so seeing success rates like these will not only help you get a loan even if you have been turned down for a traditional small business loan, but you may also be able to negotiate a lower interest rate or a higher initial amount on your loan if it’s for a well established franchise.
A great alternative to getting a small business loan from a bank or lender is to put together a team of investors to raise the initial capital needed to start your small business franchise. This could be just one person or a team of ten or twenty people, but either way you’ll need to be aware of a few of the pros and cons of having investors. Depending on how you structure your business proposal, your investors will get a percentage of the profits that the business makes and potentially a percentage of the gross income whether your company makes money or not. Essentially, your investors can be thought of as partners or shareholders. In the typical investor situation, your investors will take a high percentage of the profits until they recoup their investment and then will continue to earn money (although it will be a smaller percentage) indefinitely, assuming the business continues to make money. An example of this model working well would be if you and a few friends or relatives went in on the business together and plan to all contribute time and money to the business. If you are the type of person that wants total control of the business and you don’t like the idea of sharing your profits with your investors, then the investor model probably won’t work well for you. If you do choose to go with a group of investors, make sure that you carefully construct your business proposal so that it protects you and your business financially. You want your investors to be able to make money off of the business, but you don’t want the business to suffer financially or have cash-flow problems because you’ve agreed to pay your investors a set amount each month despite the success or lack thereof of the business.
Finally, a third option that is becoming more and more prevalent with small business franchises is direct financing from the franchisor. Not all franchisors offer this type of financing, but many larger franchisors are beginning to see the benefit it brings to them and to their franchisees. The basic protocol here is that the franchisor would evaluate the franchisee’s (that’s you) credit and consider a few other factors and then make the decision to finance. From there, you would receive the money to cover the franchise fee and all of your startup costs plus you would have the option to negotiate more money to cover the first few months operating expenses. This benefits the franchisor because it allows them to sell franchises to more people and they not only make money from the franchise fee, but they will also make money from the interest paid by the franchisee each month. The benefit it provides for the franchisee is that this is often one of the easiest ways to get financing for your franchise and the franchise will also be able to give you a much more accurate financial picture than the bank would be able to give of what’s required to own and operate their specific franchise. Bear in mind that interest rates will vary depending on the franchisor, so while in many cases it will make sense to go with direct financing, with certain franchisors, you’ll spend more money in the long run than you would with a bank loan by financing with the franchisor directly.
Hopefully you’ve gotten a good idea of the financing options available for small business franchises, but if you still have questions, or if you’d like to get some more in depth information, consider a call to FranChoice. FranChoice is a consulting company designed to take even the greenest of entrepreneurs, show them which franchise will work best for them and teach them all the intricate details of franchising. FranChoice not only helps prospective franchisors figure out the details, but also has it’s own group of consulting franchises, so whether you need some info on franchising or if you’d like to start your own FranChoice consulting franchise and help others get franchise info, FranChoice could be a great choice for you and your new small business franchise.
How To Find Financing For Your Small Business Franchise - To learn more about this author, visit Candice Clem's Website.
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If you are considering or have already decided to start a small business franchise, you may be wondering what the next steps are to get your small business up and running. While there are quite a few things needed for your small business such as a good business strategy, well thought-out business plan and possibly a team of partners and employees, the biggest obstacle you’ll most likely face will be financing. There are quite a few ways to finance a small business including small business loans, groups of investors or even financing directly through the franchisor, and while each option will get you to the same end result of opening your small business franchise, it’s important to weigh the pros and cons of each form of financing. With that said, let’s take a more in depth look at a few of the most popular ways to find financing for your small business franchise.
Assuming you don’t have hundreds of thousands of dollars tucked away somewhere that you’re going to use to start your franchise, a small business loan is going to be the most common form of financing for your franchise. The good news about getting a loan from a bank is that most banks and lenders will be more willing to award loans to small business franchises than to other types of small businesses simply because facts show that small business franchises are more likely to succeed. While there are no guarantees in any business, statistics have shown that over the course of ten years, non-franchise small business opportunities see a paltry success rate of less than 20% while small business franchises succeed 92% of the time. Banks and lenders are all about numbers and statistics, so seeing success rates like these will not only help you get a loan even if you have been turned down for a traditional small business loan, but you may also be able to negotiate a lower interest rate or a higher initial amount on your loan if it’s for a well established franchise.
A great alternative to getting a small business loan from a bank or lender is to put together a team of investors to raise the initial capital needed to start your small business franchise. This could be just one person or a team of ten or twenty people, but either way you’ll need to be aware of a few of the pros and cons of having investors. Depending on how you structure your business proposal, your investors will get a percentage of the profits that the business makes and potentially a percentage of the gross income whether your company makes money or not. Essentially, your investors can be thought of as partners or shareholders. In the typical investor situation, your investors will take a high percentage of the profits until they recoup their investment and then will continue to earn money (although it will be a smaller percentage) indefinitely, assuming the business continues to make money. An example of this model working well would be if you and a few friends or relatives went in on the business together and plan to all contribute time and money to the business. If you are the type of person that wants total control of the business and you don’t like the idea of sharing your profits with your investors, then the investor model probably won’t work well for you. If you do choose to go with a group of investors, make sure that you carefully construct your business proposal so that it protects you and your business financially. You want your investors to be able to make money off of the business, but you don’t want the business to suffer financially or have cash-flow problems because you’ve agreed to pay your investors a set amount each month despite the success or lack thereof of the business.
Finally, a third option that is becoming more and more prevalent with small business franchises is direct financing from the franchisor. Not all franchisors offer this type of financing, but many larger franchisors are beginning to see the benefit it brings to them and to their franchisees. The basic protocol here is that the franchisor would evaluate the franchisee’s (that’s you) credit and consider a few other factors and then make the decision to finance. From there, you would receive the money to cover the franchise fee and all of your startup costs plus you would have the option to negotiate more money to cover the first few months operating expenses. This benefits the franchisor because it allows them to sell franchises to more people and they not only make money from the franchise fee, but they will also make money from the interest paid by the franchisee each month. The benefit it provides for the franchisee is that this is often one of the easiest ways to get financing for your franchise and the franchise will also be able to give you a much more accurate financial picture than the bank would be able to give of what’s required to own and operate their specific franchise. Bear in mind that interest rates will vary depending on the franchisor, so while in many cases it will make sense to go with direct financing, with certain franchisors, you’ll spend more money in the long run than you would with a bank loan by financing with the franchisor directly.
Hopefully you’ve gotten a good idea of the financing options available for small business franchises, but if you still have questions, or if you’d like to get some more in depth information, consider a call to FranChoice. FranChoice is a consulting company designed to take even the greenest of entrepreneurs, show them which franchise will work best for them and teach them all the intricate details of franchising. FranChoice not only helps prospective franchisors figure out the details, but also has it’s own group of consulting franchises, so whether you need some info on franchising or if you’d like to start your own FranChoice consulting franchise and help others get franchise info, FranChoice could be a great choice for you and your new small business franchise.
How To Find Financing For Your Small Business Franchise - To learn more about this author, visit Candice Clem'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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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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Cheryl MatthynssensCheryl is a life skills coach, licensed Chemical Dependency Counselor and a 20 year entrepreneur. Cheryl's dedication to achieving a life of balance led to her expanding her teaching from the simple managing of life's daily challenges to adding financial well being as well. A direct marketer with DrinkACT, she is gaining ground in the online community with her concepts of making sure business owners, entreprenuers and employees have well rounded life styles. She opened up a small affiliate site - The Balance Guide- to help others find resources for mental and emotional well being. Visit Cheryl's blog to see more of the diversity beyond business she has began offering online at www.thebalanceguide.blogspot.com - Visit Cheryl Matthynssens'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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Leanne Hoagland-SmithAre your sales where you want them to be? Will you be one of the few who achieves sales or business success or one of the many who have failed to change? Are you tired of being told you are like everyone else? Then you may find my first book on sales of interest. Be the Red Jacket in the Sea of Gray Suits, The Keys to Unlocking Sales available at Amazon or at http://www.processspecialist.com/red-jacket.htm. This book is a reflection of my no-nonsense approach to improving sales to overall business results. If you are truly committed to making sustainable changes, then I can help you secure a positive return on your investment because I focus on executable solutions not telling you the problems you already know you have. From training to corporate (group) coaching to executive one on one coaching, my approach is to assess, create awareness, build a goal driven action plan and then execute. The bottom line question is "Not do you or your employees know it, but do you or they want to do it?" Please call for a free strategy session at 219.759.5601. - Visit Leanne Hoagland-Smith's Website |
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John AlexanderJohn has taught keyword research and SEO skills to small groups of business owners and Webmasters from over 80 different countries world wide since 2002. John is also the Director of Search Engine Academy ; Co-director of Training at Search Engine Workshops offering live, SEO Workshops with his partner SEO educator Robin Nobles, author of the very first comprehensive online search engine marketing courses at SEO Training Online and the SEO Workshop Resource Center. I look forward to hearing from you! - Visit John Alexander's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
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