Are you looking to buy a franchise but aren’t sure you can handle the costs involved? It’s true, an average middle-class salary alone probably won’t be enough to make your dream a reality, but that doesn’t mean starting a franchise is impossible even on a limited budget. You just have to know where to find the assistance you need.
What can you Afford?
In order to determine what you can afford to invest in a new business, you need to have a good understanding of your current finances. You can start figuring your net worth by compiling a balance sheet that lists all assets and liabilities. Some franchise experts believe you should not invest more than 15% of your own money, but this percentage may vary. Seeking the consult of a financial advisory is wise because they can help you determine how much of your own money you can afford to invest based on your specific financial situation.
Traditional Bank Loans
Borrowers with good credit and collateral may be able to get a traditional loan from a bank or credit union. Most lenders are more likely to offer financing for a franchised business because they are associated with an established brand that has been proven in the marketplace. However, if you are interested in investing in a lesser-known brand such as an emerging franchise or don’t have a stellar credit rating or collateral, a traditional lender may not be an option and you will need to look elsewhere for funding.
One of the first places to look for financing assistance is to the franchiser. Most franchisers offer debt financing and will back either all or part of the loan. These loans may be set up in any number of ways, so be sure to check with the franchiser regarding the specific terms and repayment schedule. Some franchisers may also be able to assist with leasing necessary equipment which is often a large portion of the start-up costs.
Certain franchisers offer incentive programs for veterans, minorities or first-time franchisees including a discount on the franchise fee or other costs, or special financing assistance. Be sure to check with the franchiser about any programs they may offer if you fall into one of these categories.
Think Outside of the Box
An investor such as family member, friend, or business partner may be willing to offer you funding as well, although allowing others to invest can come with some strings attached. Investors may require the ability to make decisions about the business and most will expect a return on their investment, which will cut your profits at first. Still, it may be worthwhile to take on investors if it allows you to get the franchise up and running.
No matter what kind of financing you choose, it's important to get all the facts in advance so that you're not caught off guard when it comes time to repay loans or investors down the line.
A limited budget does not have to mean postponing or giving up your plans to become a business owner. By finding the right financing options to meet your needs you can get started buying a franchise now and take charge of your future.
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