09 Nov FRANCHISE FINANCING
Spending money to open a new franchise requires a commitment of time, talent and of course financial resources. Prospective franchise buyers may need to finance part or all of their purchase. While many traditional lending sources such as banks view franchise financing in a positive light, they still are very stringent on their requirements, and since the last economic recession are lending less money for investors looking to open a new franchise.
The good news for prospective new franchise buyers is there are other resources available that may be beneficial in securing the capital you need to fund your new franchise purchase.
The first resource is the franchisor themselves. Financing the deal is a component every franchisor must deal with, with nearly every buyer looking to open a new franchise. Thus, franchisors will have good information about the practical options that are available to purchase their franchise units from a financing perspective.
One of these options will probably be what is commonly called a Roll-over plan, or converting your retirement plans into business investment capital. These programs allow you to access your IRA, 401K or other retirement funds and invest those funds in your new franchise business without tax consequences or early-withdraw penalties. The Roll-over plan is one of the more creative franchise financing solutions available. This funding solution should ONLY be performed by an experienced and qualified professional. Your Franstop consultant or Sunbelt Business Broker can introduce you to such a professional.
Another option is local or regional banks. If your credit history is great, and if you have significant collateral, some local banks may lend to open a new franchise. Creating a personal relationship with a bank is always a good start….if you don’t know a banker personally, ask some friends for an introduction. Bank financing can be frustrating, and with fees, interest, etc. can be expensive. If you decide to apply for a bank loan, you will need to present a comprehensive business plan that demonstrates not only your goals for the business, but how you intend to achieve those goals. Most franchisors will have sample business plans you can utilize.
Financing can make or break your ability to buy a new franchise. Consult your Franstop consultant or Sunbelt Business Broker to thoroughly investigate which franchise financing options are best for you.