Although now is a great time for prospective entrepreneurs to enter the franchising industry, many of these individuals don’t know where to start. One of the most critical unknowns when transitioning from employment to business ownership is financing. The Entrepreneur’s Source® reviews how you can set a financial plan and explore all your financing options.
As expected funding is a major concern for many individuals looking to improve their career paths, but it’s important to remember the money question is one that could be dealt with in a variety of ways and eventually overcome. Often people are not aware of the strategies available to them to finance a franchise or business.
Franchisees are expected to borrow over $30 billion during this year alone.
Lenders consistently provide commercial loans and business credit lines for proven business systems, such as franchise opportunities. Strong franchise brands with a history of success and experienced support teams are viewed as an important and tangible asset for lending companies. In many cases, you do not have to rely on one single source of funding and can look to multiple avenues to achieve your financing goals. Here are just a few of financing options available today:
- Traditional Commercial Bank Loans
- Equipment Leases & Loans
- Lines of Credit and Unsecured Loans
- Angel Investors
- Creative Leverage of Existing Assets
The key is to learn more about both traditional and non-traditional forms of funding that you may not be aware of. For instance, most people who have a 401k don’t think they can leverage it without a steep financial penalty. However, many small businesses today got their start with what is called a 401K rollover.
Other funding often overlooked or simply not considered are things like whether you qualify for a veteran discount or a small business loan through the Small Business Association (SBA). Even during difficult economic times, the combined elements of a proven success record of a franchise system and the credit history of the franchise prospect, are ideally suited for many financing options.
Other options to consider:
Franchisors that offer Financing.
Many franchise brands have created their own franchise incentive or financing programs for both first time prospects and multi-unit owners. In fact, Steve Caldiera, president and CEO of the International Franchise Association (IFA) reported that as many as 100 franchise brands offer original financing solutions, such as discounts or refunded franchising fees, to aid in franchise ownership and that this number is expected to increase.
Many franchisors, while not directly involved in financing, have established preferred relationships with banks and other lenders. These lenders have financed loans for past franchisees and understand the specific needs of that particular franchise. Their experience will speed up the process and help them process future loans to the franchisee’s best advantage.
No matter what, there are numerous sources for finding funding outside the traditional avenues. It is simply a matter of exploration. “People from all walks of life are making career transitions, and many are now choosing to take control of their destiny by considering becoming self-sufficient. The Entrepreneur’s Source® provides aspiring entrepreneurs with the tools needed to create a roadmap to financial freedom,” says Terry Powell, Founder of The Entrepreneur’s Source®, which has helped tens of thousands of people find new business opportunities throughout its 25-plus years.