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Franchise Financing For Your New Business
Posted on November 11, 2010 by My Franchise Law

So you’ve decided to pursue a franchise opportunity, but don’t know where to turn to raise the necessary funds? Here are several options to consider:

Small business loan:  There are many banks that look favorably upon franchisees because a template for success already exists, and statistically speaking, franchise owners often are more successful than independent business owners. Start by reviewing all of the available options through local banks, and see which institutions offer the most competitive rates and terms for your business.

Your franchisor: When you meet with your potential franchisor, find out if they are already pre-approved for financing (which you may be able to take advantage of). Also, find out if there is a special franchise funding program available through the company for new buyers. It is in the franchisor’s best interest to have a buyer purchase a franchise, with solid funding at reasonable rates, so they can grow the business and succeed long-term, so be sure and ask if any special funding programs are already in place.

Investors: With certain franchises, especially those with a recognizable brand name, you may be able to appeal to additional investors (outside of banks) willing to bear some of the initial financial burden for a percentage of your business.  Be sure to prepare a clear franchise business proposal - including a budget, goals, and past business successes in order to attract reliable investors to your franchise investment.

Friends and family: You may also want to look within your own social network of friends and family to determine if there are any potential investors. However, accepting money from personal contacts can be a tricky issue, so it’s important to draw up a clear and concise contract that will outline both party’s obligations and expectations to ensure that both parties are protected during the investment process.

External Resources

Small Business Administration

A government resource for finding information on planning, mentoring, and strategies for franchises and small businesses.
SBA Small Business Planner Business Gateway

Resources for every step in planning your business or non-profit, from getting your EIN to handling wages. Business Gateway

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