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What is Franchise Financing

Once you have found franchise, you will need funds to invest in. It might be possible that you have all the money with you to make a start up. But more than often people do not have enough funds to start their business. Should they forget about their dream of having a business of their own? No, they need not! With proper planning and with many options available for collecting finance of your business, you can successfully start your franchise business.

As For starting a business, you need a convincing business plan; in the same way you need a sound financing strategy to support your business. This strategy should include many sources of capital. You can examine various financing resources which can be explored. But before considering any option, you must keep some guidelines in your mind.

The first step towards franchise financing is you need to make a list of all of your assets and debts. It will give an idea of your financial situation at present. You can get to know how much money you have for funding your business and how much you need to borrow until you start getting a positive cash flow. Be prepared with all the documents to definine your financial situation.

In the process, you can consult your franchisor for guidance in this regard as they want you to start as early as you can. You can also meet other franchisees as they can give you a clue about various sources of funding. Approach franchisors for discount in fees, reduction in upfront costs, funding of equipments or buy back of equipment and refunding of fees if you are not able to gather finances. If you have home equity, you can use your home as collateral to finance your business. Using retirement funds or other savings is also an option. Try to collaborate in your venture with some partner who is willing to invest in your business.

Now you can approach lenders for loans. A lender wants to see a solid and realistic business plan. Besides assessing your ability to pay, they also assess your integrity and work ethics.

Divide your funding needs into three parts like franchise fee, real estate, equipment and other costs. You can approach lenders specializing in different kind of loans rather than approaching one for general business purpose.

You can ask for loan from conventional lenders like large, local or regional banks, financial institutions. You can take the help of finance companies which specialize in finance related loans.

To get reliable franchise financing, Along with a good business plan, you need to have good credit history and patience to succeed.

Running of franchise business lets you make profits on the experience and wisdom of someone else
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