What Are Your Franchise Financing Options
We all know a franchise is a relatively safe investment and if we all had the financial power to buy one we would. Unfortunately many of us do not have enough capital for the startup investment so what franchise financing options are available to us? Mostly loans but this isn't your typical personal loan. Because you intend to start a franchise, there are specific loans for this type of small business known as SBA loans. There are additional possible solutions in which the loans are specifically related to franchise businesses. We will take a quick look at the available loans and some of the requirements in order for the loan to be accepted.
SBA loans are probably the most common types of loans and franchises. Given by the Small Business Administration, these franchise financing options can go up to $100,000 which is far more than enough if you are starting a franchise that requires less than $100,000 in cash. The rest of the investment will be covered over time but you do have it take into consideration that now you have two creditors. Actually the second one is not necessarily a creditor but it's actually the amount left for you to pay you for your franchise becomes profitable.
Another type of loan would be non-SBA loans and specialty financing which are more commercialized type of loans that specializes in franchise financing through equipment leases and structured term loans. It can also use your 401K or IRA prematurely as startup capital without penalties or taxes. Of course since these are not government loans they are far more flexible so you can actually borrow a very big sum of cash if you intend on investing in a franchise that requires a large startup capital. This kind of loan can basically open doors to more franchises.
The last and final option would be to franchisor itself or your own personal assets. In most cases franchisors will have their own preferred list of lenders. This can be a great solution because some of them might provide you with a good interest rate. If you do not want to make a loan, your own personal assets could be used as startup capital. Since franchises can vary a lot in prices, some of you may need to liquidate bonds, stocks or even sell properties. You can even access your 401k or IRA for more franchise financing. In order to get a loan, the lender must be able to trust you and the only way for them to trust you is to meet at least four requirements which are cash, credit, collateral and character. Very rare will you be able to borrow all the cash you need and in order for them to know that you will be making payments on time they need to verify how good your credit is. Collateral won't be a problem if you pay them back but if you can't you need to be able to guarantee your loan with a compensation if you cannot pay them back. These franchise financing options are not easy to get so make sure that you have a clean financial folder. These are only the main solutions available and if you want more information you should visit your local bank or franchisor for more information. Getting a loan for your franchise is not easy and is hard to repay so you should clearly make sure that you can cover your investment before making a loan because although these franchise financing options may seem great not all of them will offer good payment terms.
Burger King Franchise
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