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Ways to Obtain Financing to Buy a Franchise

Written by: Michael Hemenway

Article Overview: Getting the required financing is the first step towards starting a franchise. Some traditional methods are getting financing from one’s own savings, asking for loans from friends, going for bank or SBA loans and one unconventional way is to go for loans from credit-cards.

Ways to Obtain Financing to Buy a Franchise

Remember the famous shouting match between Tom Cruise’s character and Cuba Gooding Jr.’s character in the movie “Jerry McGuire”, which culminated in the phrase, “Show me the money”? That is exactly what your franchisor is going to tell you when you approach the concept in response to its franchise business for sale offers. So, when you are in the market to buy a franchise, first figure out the ways to obtain the money required for the business. To help you in this situation, here are some pointers:

• Dip into your savings. If you have been working for long and have quite a good amount of money in the bank, use a portion of it to finance your franchise business. But don’t use all your savings, because besides the start-up cost, there will be the cost of running the business till it starts making profits. Also saving for emergencies is also a must. But if your partner is working, you can surely take the risk of investing the money in starting a franchise.

• Use credit-card loans. The founders of Google did that and look where they are now! But there are certain things you need to remember in this regard. First, you must have a decent credit score. Also make sure you have enough provision to pay the monthly payments and won’t default.

• Ask relatives. Many of us hesitate to do that because of the fear of losing a friend or relative or just for the fear of being looked down upon. But both of the fears are baseless; if you proceed in a professional manner and promise them in writing to pay within a stipulated time-period, then there won’t be any question of refusal. And if you are genuinely interested in the business and sincere about your plans, asking for help won’t demean you. Remember that it’s always better to ask from the relatives than from the strangers.

• Go for bank loans. It’s the traditional method of getting money, but sometimes getting bank-loans becomes difficult for individuals who are new to the business. In that case, it’s better if you go for SBA loans, especially if you are starting a franchise of small business franchise opportunity. CIT Small Business Lending is one of many companies that offers SBA loans.

• Consider borrowing against your 401(k) or retirement funds. Companies like Guidant Financial Services offer programs to do just that.

These are some of the common methods of getting financing to make your dream of buying a franchise come true. Top franchises help their franchisees in getting finance, so if you are buying such a franchise, half of your work is done.

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Article Tags: amount of money, bank loans, business for sale, credit card loans, credit score, cuba gooding, cuba gooding jr, demean, emergencies, franchise business, franchisor, getting money, google, jerry mcguire, losing a friend, money in the bank, professional manner, sba loans, shouting match, tom cruise



Related Forum Posts
Re: Enticing Franchises - Top 9 List - All Franchise listed above are in millions of dollars. Do you have the list of Franchise in thousands
Re: Info for would be franchisers... - [quote="Sebastien":1d29sdv1]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to. I just want to mention that all these magazines are NOT franchisee oriented. I mean these magazines are for franchise professionals. If you're looking to buy a franchise, you won't find much information in there. To answer your question, getting published in Franchise Times was fairly easy. I don't want to brag too much but I think I am known in the franchise industry. I was the marketing guy at Franchise.com for a few years before joining my new company, the World Franchising Network. So people know me and I have a very good relationship with Nancy Weingartner, the Managing Editor at Franchise Times. I was talking with her at the last Franchise Expo South in Miami and she mentioned she'd like me to be profiled. I was like "ok, sure!". I like this franchise executive profile thing in Franchise Times as it is rarely BS. People are usually really natural in there.[/quote:1d29sdv1] Thanks for the follow up Sebastien! And I can't say that I'm surprised that networking with the right people and managing your relationships with them properly are the keys to being published. I guess the old adage holds true of "it's not who you know, but who knows you" that's important.
how much for a franchise fee? - Dear Colleague There is no easy answer to this question. Things to consider: [list=] The sizeof the Franchise Clent base Expected Turnover Intellectual Property costs (recoup) Number of Franchises Number of employees Original Set up costs Franchise admin costs An example: A franchise that I was involved in setting was to a simple "lawn mowing/home repair" franchise. The Franchise included national/local advertising - preparation of client lists - general admin - central accounting etc The Franchise involved 300-500 clients - and an annual turnover of about $300,000 . The annual franchise fee was $30,000. Hope that this gives you some idea Take care Ian[/list]
Re: Franchise Surveys - Another good tool to researching a franchise is to speak with their existing franchisees. This contact information is included in most Franchise Disclosure Documents. In order to get a Franchise Disclosure Document or FDD as it is often referred to, you will have to complete a basic franchise application. The franchisor will then usually provide you with the FDD at that time. Included in that book of information is a list of the existing franchisees, the contract, the investment information etc... This information is required by Federal Law to be disclosed to your prior to making a purchase. So be sure to do your research and start with the Franchise Documents to get the initial information.
Re: Info for would be franchisers... - [quote="Sebastien":2gam0klq][quote="BuzzAroundBooks":2gam0klq]Like Franchise Times, Franchise Update is a very practical magazine. There is no blah blah, just straight facts that anyone in the franchise community can relate to.[/quote:2gam0klq][/quote:2gam0klq] That is really what I look for in any industry publication. We lead busy lives and when people fill their magazines with fluff, not only does it benefit no one, but it makes us truly appreciate those that don't. Thanks!


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