10 Common and Not-So-Common Ways to Fund Your Franchise

If you’ve always dreamed of #OwningYourOwnBusiness and #BeingYourOwnBoss, #Franchising could provide the perfect opportunity for you. But you may be wondering, “Where do I start?” How do you #RaiseTheMoneyYouNeed to get your franchise business up and running?

Fortunately, there are several ways to get the money you need to start a franchise. Here are the five most common ways to #RaiseCapitalToFundAFfranchise, followed by a few less-common alternatives!

1)???Cash reserves! Don’t be afraid to use your savings to fund your franchise. Just be sure to research all the costs associated with your franchise, so you know exactly how much money you will need.

2)???Retirement savings! Entrepreneurs and franchisees use 401(k)/IRA?rollovers quite often to get their business dream underway! 401(k) rollovers can allow you to invest up to 100% of your retirement funds into your own business without paying early withdrawal penalties or taxes. This can also help you meet cash injection qualifications for other funding sources such as SBA Loans. 401(k) rollovers can offer several advantages, including taking on less or no debt, which can accelerate?your profitability. 401(k) rollovers can also provide the opportunity for an immediate salary for the owners, the ability to offer retirement plans for your employees, and more. They typically fund in as little as 2-4 weeks. There are several reasons why it may be better to use your 401(k) vs. accessing your savings or taking out a loan. First, the 401(k) funds are pre-tax dollars, so you?get more "buying power" from these funds. The money coming out of a traditional savings account are after-tax dollars. And, if you opt for a loan, you will repay the loan with interest. Not so with a 401(k) rollover.

3)???Small Business Administration (SBA) Loans - SBA loans can be a great method for funding your franchise. Most SBA loans can be secured and funded within 8-12 weeks. While the SBA does not actually provide loans, they will offer a partial loan guarantee for qualified borrowers making the loan more attractive and less risky to the actual lender. Lenders may then fund up to 70%, and possibly as much as nearly 90% of the initial franchise investment.

4)???Unsecured Loans - Often referred to as a "signature loan" an unsecured loan is simply a loan that's extended to a borrower based on their personal credit worthiness and usually requires no collateral. Typically to qualify for an unsecured loan a borrower will need a minimum credit score of 700, have no derogatory credit remarks and have less than 35% utilization of their current credit accounts, such as credit cards and other lines of credit. Unsecured loans can take as little as two weeks to fund.

5)???Home Equity Lines of Credit - Home equity lines of credit can be a relatively low-cost method of funding your franchise. Home equity lines typically have lower fees and may offer lower interest rates than other?loan types, depending on your credit. You also are only paying interest on the funds you access, and therefore may incur less interest charges. A home equity line can usually be established in 30 - 60 days.

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Now that we’ve explored the most common ways to get the money you need to start a franchise – let’s look at some alternatives!

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1)???Grants. There are many grants out there for entrepreneurs – even the Small Business Administration offers a few. A little legwork may help you find the money you need!

2)???Family. You may have relatives willing to help you get your start. You’ll never know if you don’t ask! Your family will be more willing to help if you have a great business plan in place.

3)???Investors. There are many people out there with the money to invest, but no desire to do the work. Finding one of these people can help you realize your dream of business ownership. It’s important to note, however, that many franchisors frown upon using a private investor, and may be unlikely to award you a franchise if this is the source of your funding. It will be important to do your research and determine what your chosen franchisor will and will not allow before exploring this path. ?

4)???GoFundMe. You’ve seen this used all around to help people. With the right promotion and network, you could potentially raise some of the money you need with this free tool. Most franchises require significant funding – it could be quite a stretch to expect to reach your financial goal with a GoFundMe. But if you just need a “little more money” to hit your target, this could be a helpful financial resource.

5)???Crowdfunding! Similar in nature to a GoFundMe, crowdfunding is becoming more popular and viable. Again, be sure to know what your chosen franchisor will allow for your funding, and be aware that this could be a difficult way to achieve your funding goals.

All of these alternative #FranchiseFunding options have one thing in common. They will work best if you have a #GreatBusinessPlan! Research is key to creating a business plan.

As a #FranchisingConsultant, I can help you find the perfect franchise that you can be passionate about, but I can also help you get all your ducks in a row to find all the resources you’re going to need.

Every big adventure starts with one small step! I look forward to helping you find your passion and live your business dreams! Let’s chat.?