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Finding the Money for a Franchise

Written by: Mary Tomzack

Article 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...

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.

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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



Related Forum Posts
Re: How Can I Make Money Out of This Need? - I love the concept of the Good Samaritan aspect. How about creating a report about Finding Money You Never Knew you Had, packaging it and promoting, selling it for $10 and this insurance aspect is the crowning jewel.... oo - lets drill this out Barb....I think this would be a good idea - but you will have to be very very careful. keep in mind all the internet scam going on.... an email that told me I was due..$$ would freak me out
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.


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