Franchise Talk

ISFMA Blog:

Every business venture needs financing; and it’s no different when you are considering a franchise. But the advantage of franchising is that here you have a clear-cut picture regarding how much money you will need. The franchisor will give you a detailed description of your expected expenditures in different departments. Some franchise opportunities make it easy for the franchisees in getting the required franchise funding. While some offer third-party financing, others are registered as small business franchises. Below are some popular franchise financing options:

* Help from the franchisor: Many top franchises provide very good options to the candidates who apply for considering a franchise. Some have in-house financing options whereas others have third-party financing plans. Some franchise concepts offer equipment-buying and leasing plans as well.

* SBA loans: Small business loans have easy repayment terms and lower interest rates. But your business has to be registered as a small business to be eligible for this loan. So, considering a franchise is definitely a good idea.

* Loans from traditional lenders: If your credit history is good and you have an excellently written business plan, getting loans from traditional lending institutes won’t be difficult. Many franchise concepts help the franchisees, starting a franchise with them, in writing this business plan. So, ask whether your franchisor is offering one. Many loans will require collateral to be presented, so it will help, if you have a property that you can put up to back the loan. Regardless of whether you have help from your franchisor here, franchises are generally looked upon more favorably by lending institutions, given their higher rate of success.

* IRA/401 (k) loans: Your IRA and 401(k) plan can be used to finance your dream of starting a franchise. People with significant amount in these accounts, like those in their late 50s and early 60s, will especially do well if they go for this form of financing. However, never put all your money in the business, since at this age it won’t be easy to build a decent nest egg. The best way is to use this option as a down payment for the SBA loan. Guidant Financial can help you find ways to obtain 401(k) financing without paying an early-withdrawal penalty.