Franchise ownership is an excellent business to start. Having both the flexibility of a small business and the support of a large organization is great when you’re starting as an entrepreneur. If you have retired as a director or been laid off, you can be your own boss by getting into the franchise business.
However, the biggest obstacle in owning a franchise is the franchise cost. Most people cannot finance a franchise, and they don’t know how to raise the required capital. In this blog post, we will share different ways of financing a franchise to kickstart your entrepreneurial journey.
The first thing you do before approaching a lender is determining your net worth. That way, you will know how much of a loan you can ask for. The best way to assess your net worth is by accumulating your assets and dividing them by your total liabilities. Once you know what you are worth, you can make a better financial decision.
Your first step in financing your franchise is to connect with your franchise coach. They will have options for financing your franchise. After understanding your financial needs, they will be able to give the best direction for requesting the finances needed for your business. The best thing about taking financial support from your franchise coach is that they become a key resource in your franchise journey.
Another common way of financing is through commercial loans. A term loan is what comes to mind when people think about financing. In this model, a bank or a lending institution provides a lump-sum amount that can be used for funding. The payment model is broken down into monthly installments, and a large amount is to be returned in the form of interest. However, acquiring a business loan can require multiple verifications of credit trustworthiness.
One of the most sought after option for financing a franchise are SBA loans. These are partially backed by the US Small Business Administration. These loans follow a similar structure as a commercial loan. However, since they are funded by the government, lenders are comfortable in providing more money for less interest and longer repayment terms. This is the easiest form of acquiring a loan and most convenient as well because as your franchise grows and starts making profits, which makes it easier to pay back your amount plus the interest amount as well.
Funding a franchise is one thing and having the resource of your franchise coach on board before you start looking for money will improve your overall experience. Getting franchisors on board requires hard work, preparation, and business knowledge. Most beginner entrepreneurs don’t know what it takes to win franchisors, but Franchise Frank can help. Schedule a call today to understand the process.