Franchise Financing: 4 Things You Should Know
If you’re looking into purchasing a franchise there are several things you need to know and do beforehand. There are many benefits to purchasing a franchise vs. starting a business from the ground up but it’s crucial that you know everything involved in doing so!
The type of business you’re looking to purchase (service or product) will ultimately determine the cost to begin. Service-based businesses like travel agencies and cleaning businesses are commonly less expensive to start than brick-and-mortar product businesses like convenience stores or fast food restaurants because you won’t need as much in terms of supplies or other materials at the beginning.
Franchisors want to know that you are able to afford to purchase their franchise because it’s their reputation and their business on the line.
How do you properly fund your franchise? Here are a few things you should know about franchise financing.
Know ALL The Costs
There are many costs associated with buying a franchise and many of those costs are initial, or upfront costs, in order to get the business off the ground.
Here are some of the costs associated with buying a franchise:
- Startup Costs
- Franchise Fee
- Royalty Fees
- Professional Fees
- Operating Capital
Once you get past the first few steps of inquiring about a franchise, you’ll get the Franchise Disclosure Document (FDD) which lays everything out for you in terms of costs and any other pertinent information you should know.
Know What You Have
Before even deciding to purchase a franchise you should know what kind of money you are able to put into the investment. The more money you have to invest the less you will need to finance.
Our franchise calculator can help put things in perspective as far as what you are able to reasonably afford. We also offer assistance in working within your budget while still adhering to your interests and values!
Once you know your own money situation, you can then move forward to funding if necessary.
Franchise Financing
If you need financial assistance through loans and funding you’ll realize that it’s different for franchise purchasers than a typical business that needs funding over time.
This is because in the franchise world it’s all done at once and upfront. You purchase the entire business before any work begins. You’ll need more money upfront to take care of all the initial costs needed to start the franchise.
You’ll need to have some capital (10% – 30% of the investment) upfront to show the bank that you have skin in the game.
Financing Options
If you need help financing your franchise it’s best to look at all your options. Here are a few ways to finance and fund your franchise:
- 401K Rollover
- SBA loans (popular option)
- Home equity financing
- Conventional loans
- Franchisor financing – Some franchisors offer their own financing to potential franchisees!
Need Assistance With Finding And Funding A Franchise? See MVision Franchise
From initial inquiry to the handing over of the keys, let us here at MVision Franchise be your guide to all things franchising.
We work with you every step of the way to ensure you are getting the business you want and one you can reasonably afford.
As a franchise consultant for almost 2 decades, owner and founder of MVision Franchise, Marc Camras has built up the largest network of franchise options and startup concepts.
Check out our most recent article, Reasons To Hire A Franchise Consultant, to see why it’s so important to have an expert guide!
To learn more about Marc Camras and how we can help you get started with your franchise, continue reading our articles, take a look at the helpful resources and schedule a call today!