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Finding the Money for a Franchise
Written by: Mary TomzackArticle Overview: The cost of buying a franchise can be substantial, but you don't have to be a trust fund baby to get into the franchise of your dreams. Find out more...
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Free Download - Why You Lost Yet Another Franchisee Prospect to Your Competitor By Mary Tomzack |
Finding the Money for a Franchise
The cost of buying a franchise can be substantial, but you don't have to be a trust fund baby to get into the franchise of your dreams. Where is the funding going to come from? That's the number one question franchise buyers ask. There are numerous sources of capital, but start with these basic steps first.
1. Talk to the franchisor. About one in three franchisors provide financing directly or have arrangements with third party lenders. You will find any financing arrangements spelled out in Item 10 of the UFOC. Even if the franchisor doesn't have money to offer, it is still the best source of information about your financing options.
2. Look within. It is a common misconception that you can or should borrow all the money to open a franchise. Be prepared to come up with at least 25 to 30 percent of the total start-up costs. To assess personal resources, start by preparing a personal financial statement (you'll need one to present to lenders anyway).
3. Ask family and friends. This is one of the most common ways to finance a new business. After all, who knows your dreams and capabilities better? Plus, they want to help you succeed.
4. Call your accountant. Ask your accountant to recommend a banker. A good accountant - one with small business experience - is usually a great source of leads.
5. Find a specialist. You should start at the bank where you do your personal banking, but there's a good chance you won't get what you need there. Local banks are often unable to fund franchise projects. Your chances will be much better with independent lenders like GE Capital Franchise Finance that specialize in franchise lending.
6. Search the SBA Franchise Registry (www.franchiseregistry.com). The SBA's small business lending guarantee program is a key source of loans. This program for new franchise buyers is much easier to access since the creation of the Franchise Registry, a central database of information about franchisors that have been certified by the SBA.
Article Tags: business experience, business lending, buying a franchise, central database, financing options, franchise buyers, franchise finance, franchise registry, franchisor, franchisors, ge capital, guarantee program, independent lenders, party lenders, personal banking, personal financial statement, personal resources, sba, trust fund baby, ufoc
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About the Author: Mary Tomzack RSS for Mary's articles - Visit Mary's website MARY E. TOMZACK is the founder of FranchiseHelp.com - the world's largest directory of franchise business opportunities. She is a noted franchise expert and the author of Tips & Traps When Buying a Franchise, one of the industry's first and most respected guides to finding, evaluating, and financing a franchise investment. Ms. Tomzack is often interviewed for franchise articles in publications such as The New York Times, "Franchise World" and "Entrepreneur Magazine" and was recently featured at a Harvard Business School panel on franchising for MBAs. Read FranchiseHelp's latest franchise information at the FH blog or reach Mary at company@franchisehelp.com or at 888-491-FRAN (3726). Click here to visit Mary's website Setting Priorities Worksheet 50 Franchises for Under $50K! |
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