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Finding the Money for a Franchise



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.



Finding the Money for a Franchise - To learn more about this author, visit Mary Tomzack's Website.

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About the Author


Mary Tomzack
(Visit Mary's Website)
MARY E. TOMZACK is the President and Founder of FranchiseHelp, Inc. She is a noted franchise expert and the author of Tips & Traps When Buying a Franchise (First publication,1994,McGraw-Hill; new and completely updated, revised edition, 1999,Source Book Publications). Ms. Tomzack is often interviewed for franchise articles in publications such as The New York Times, "Franchise World" and "Entrepreneur Magazine." Reach her at (914) 347-6735 or at m tomzack@franchisehelp.com or co mpany@franchisehelp.com
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