Franchise Financing Today – The 411 On Funding Your Franchise
Today’s economics make acquiring a loan a challenge for just about everyone, even more so if you’re wanting the funds for a start-up. Start-ups are risky, but there is a variety of financing options available if you qualify. The concern is to choose the funding strategy that is right for you, and that may take some creative thinking when looking at those financing options.
Listening to the nightly news, you may believe that there isn’t any money for such loans. However, there is money available by those who weren’t affected by the crash of the housing market, thus they are still able to make loans. For the franchise industry though, those loans may not be in a traditional manner.
If buying into a franchise is something you’re interested in, you should first look at the various sources of franchise financing options before deciding which franchise you want. In the past, most franchises have been financed by home-equity. Today though, that sort of franchise financing is difficult in today’s economic climate. However, the alternatives are many and in many ways, more appealing. Another thing that affects franchise lending is your personal credit score. Anything under 700 will have a much harder time getting a loan.
After you have chosen a franchise and received your franchise loan approval, you have to move fast to close the deal. Today, lenders won’t wait more than 30 days and in most cases, require you close the deal in 10 days or less. While money is there to be lent, it is limited and if you don’t take what you’re approved for, they have others waiting for approval.
With the economics of today, the time-tested approach for a franchise loan doesn’t work. Here we offer three different alternatives that are creative in getting the funding you need to buy a franchise:
Franchise Funding Specialists
There are companies that specialize in franchise financing. They watch the franchise market daily and can help you choose the finance option that would work best for you. They will explain these options to you and the different strategies available for you to utilize.
These franchise funding specialist have relationships in place with various lenders who specialize on franchise financing, including equipment-leasing. Other options these lenders offer are 401(k) rollover products, conventional lending, SBA lending and signature credit lines. By working with these companies, they can give you a realistic idea of how much credit you can expect, if any at all.
These franchise funding specialist will advise you on what financial information is needed by you and help you form a strategy in borrowing the needed funds. After you have decided to move forward with this, they will create a financial package from the information you provide and will stay with you throughout the entire process. Because they have these close relationships with lenders, they have the experience and knowledge what information is critical to expedite your loan request. In most cases, there is no fee paid by you to the company unless you are funded. Before agreeing to work with a franchise funding specialist, confirm any and all fees.
Cash Always Rules
Even more so in times of economic uncertainty. Every industry has had its share of executives displaced and they will tell you that it was having cash on hand that got them through their transition period. It could have been the cash they received from their severance package or it could have been from their continuing benefits like retirement accounts and rollovers.
The important thing to decide in this case is how to “invest” your cash so that you can re-create yourself by way of new income or by creating additional wealth. One investment to consider is building a franchise which will provide support for you and your family. Some people have discovered that building a franchise will give them the same, or more, return than investing in the stock market. This also allows them more control over their money.
Service Deserves Thanks
For the men and women who serve to protect our country, the Patriot Express Pilot program has been established by the government. This is a loan program designed for those current or formerly, in the military, as well as their spouses, and is SBA-guaranteed. These loans are 85% guaranteed by the SBA which makes the lender at risk for only 15% of the loan. Required credit scores aren’t as strict with this loan program as they are with other loans, making qualifying easier.
The VetFran Program is another option for those honorably discharged. This program was started by The International Franchise Association to assist veterans to find a way to transfer back into civilian life. Over 300 companies have entered into the program and substantial discounts are offered on the expenses and fees of starting up a franchise.
There are a variety of financing options for a new franchise, it pays to do careful research and find the one that best works for the individual looking. While lending belts have tightened, there is still money available for the right person at the right time with the right opportunity.