Financing Tips for a Franchise

Investing in an existing brand can be a great way to start a business that you can be confident is likely to succeed. Franchising is a win-win arrangement that can do a lot of good for all involved. However, to make your new franchise business a success, you will need to apply a few tried and tested ideas.

Getting Started

First, it is important to get started on the right foot. You need to choose which brand you will be franchising with. Of course, this should be primarily based on which you believe has the best opportunity to succeed in your chosen area. However, you should also consider the upfront costs, profit sharing, supply expenses, and more.

Once you have a brand in mind, you will need to apply. Doing so typically requires you to demonstrate that you have the necessary upfront capital.

Finding Franchising Funding

Getting funding for opening a new location can be achieved through a number of mechanisms. You may be able to bring together a few partners to invest. Alternatively, you could pursue a franchising loan. The SBA can help guarantee a loan for your new business. Finally, you may be able to get financing through the franchisor. Although, not all of them offer this option.

Tips for Franchising Success

With funding in hand and an approval, you need to get to work. The following are some tips that can help you find success in your new business:

  • Know Your Funding Source: Before starting other work, figure out the financing. This is often challenging. Don’t invest too much time until you have this question solved. Make sure to talk to friends and family as well as the franchisor about possible funding.
  • Be Honest: If you have anyone helping you with the upfront costs, be completely honest. Even bending the truth will lead to trouble down the road.
  • Consider Used: Keep your operation as lean as possible. When possible, try to buy used equipment. This is sometimes not allowed by the franchisor. That should be a consideration in your choice.
  • Don’t Spend It All: Liquidity is very important in business. Make sure you are keeping your coffers full. If you spend everything upfront or pay off debts too early, you may find yourself in a liquidity crisis.

Learn More

Discover more about how to finance and run a franchise. Keep the above tips in mind if you decide this is the right path for you.

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