Coming out of a pandemic may seem like a strange time to think about opening your own business, but for many people, the idea of heading back into an office after being their own boss for a while has them rethinking their options. The good thing about owning a franchise is that while you get to be your own boss, you also have the backing of what is usually a national or maybe even international company. The safety and security that you get with that comes at a price, however. And that price can be a lot in terms of capital. So here are some creative ways to raise capital for a franchising fee and other start-up costs.
The first thing most people think of when looking for financing is a commercial bank loan or SBA (Small Business Administration) loan. For a commercial bank loan, the lender will want to look into your personal credit history to determine your credit worthiness, and this will be used to establish what you can borrow and the terms. They will also want to see your detailed business plan. An SBA loan is usually the more desirable options since the US government partially backs it. You still need to be able to show a business plan and credit worthiness, however.
Alternative lenders are often sought by individuals who don’t qualify for other lending opportunities because they have less strict requirements. They also have higher costs and fees and shorter timelines, most often, and they are the riskiest choice on this list.
Today, the term crowdfunding means something specific, seeking start-up capital online through backers. That is undoubtedly an excellent choice for many would-be franchise owners. Other “crowds” you should consider for funding are your friends, family, and local communities. There may be many prospective partners closer than you think.
The last item on this list should probably be your first stop when looking for franchise start-up capital: the franchising company you are interested in. The odds are good that the company you are interested in franchising from already has a system in place to assist prospective franchisees. Many companies actually offer the financing themselves, while others have relationships with outside lenders already established to assist in that way. The biggest benefit of financing this way is that the company already knows the ins and outs of their business – they know not only how much their rate is, but also what start-up equipment and goods are necessary, and their funding often covers all of that. However, different companies have different offers, so it is always important to have an attorney or broker you trust read over the details with you.
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