Where to Start
There are many ways to fund your new franchise, franchise re-sale or business opportunity. Knowing how much you can afford to invest in a business is every bit as important as knowing how much you can invest in a new home for example. Of course, there may be a range of what you are willing to invest when you factor in your available cash, net worth, credit rating and return on Investment etc. Understanding funding options is important in the early stages of investigating franchise opportunities and FranDecision can help you with this.
When people look to invest in real estate, they typically enlist the help of a real estate broker. Your broker will first work with you to understand what type of home you are looking and help you figure out exactly what is in your budget. The best real-estate brokers will work on this with you before you go looking at properties.
When looking for a franchise to invest in, it makes sense to enlist us to first to explore what type of franchise is a good fit for you as well as what is in your budget before you start looking at franchises. At FranDecision, we are not real estate brokers, however we are also experienced in finding the right location and territory for your franchise.
There are likely more ways to fund your new business than you are aware of, and it is also possible to use a combination of options. Navigating the options and identifying great lending partners is important part of the franchise due-diligence process.
The availability of funds and what you may qualify for depends on several factors including your own credit score and net worth. The typical places money comes from outside of your own savings include:
SBA Loans – The Small Business Administration (SBA) does not actually provide loans; they guarantee a part of the loan for local banks and credit unions, thereby mitigating some of the risk those banks incur in making the loan. SBA loans are a common financing option for new franchise as well as franchise re-sales and typically come with competitive terms and interest rates.
Conventional Loans – these loans are made by banks without the benefit of the SBA guarantee and can be much harder to obtain because they are primarily made based on the credit risk of the business and collateral provided by the borrower.
ROBS – Called “Roll-Overs for Business Start-Ups,” this allows you to use funds from your 401k, IRA, 403(b) or other retirement account with no taxes, penalties or debt. It can also be the necessary capital injection for a Small Business Administration (SBA) loan. ROB’s have become a very common form of funding for franchises and there are some great companies who can help with facilitating this option.
Home Equity Loans and HELOCs – it is possible to get a loan based on the equity in your home and use this money for your business.
Equipment Leasing – you can frequently get funding for 100% of the amount of any machinery, equipment and vehicles.
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Your results will include your maximum funding amount, a list of your funding options and a comparison chart of your pre-approved programs.