There are several ways you can finance a franchise.
You can use your own savings, use qualified retirement funds, take out a loan, or seek financing from investors.
If you’re thinking about franchising your business, it’s important to understand the different financing options available to you.
This will help you choose the best option for your franchise.
Using Your Own Savings
One way to finance a franchise is to use your own savings. This can be a good option if you have the money available and you don’t want to take on debt.
However, using your own savings can also be a risk because if the franchise does not lead up to expectations, you could lose your investment.
Using Your Retirement Funds
Many people “rollover” their qualified retirement funds to help finance their new business with no tax and no penalties.
There are rules and regulations that must be adhered to if you choose this route, but it can also be a good way to diversify your investments if you aren’t happy keeping all of your eggs in one basket (the market).
Taking Out a Loan
Another option for financing a franchise is to take out a loan. There are many different types of loans available, so you’ll need to shop around to find the best rate and terms for your franchise.
Be sure to consider the total cost of the franchise, including franchise fees and start-up costs, when you’re calculating how much you can afford to borrow.
You will typically need to inject 25-30% of the total investment number from personal funds and can finance 70-75% of the total investment, assuming you meet the qualifications for the loan.
Seeking Financing from Investors
A third option for financing a franchise is to seek financing from investors. This can be a good option if you don’t have the money available to invest yourself or if you want to minimize your personal financial risk.
However, it can be difficult to find investors who are willing to finance you unless you have a previous relationship with them.
You’ll need to have a strong business plan and be able to convince potential investors that your franchise is a good investment. And be ready to share some ownership with them or pay a higher interest rate.
The best way to finance a franchise will vary depending on your personal circumstances. Be sure to consider all of your options and choose the option that’s best for you and your franchise.
And, of course, the best way to discover which finance option may be best for you is to connect with your franchise consultant. They will help you with the pros and cons of every option available to you.
Franchise Matchmakers is a team of franchising professionals that are dedicated to helping people explore business ownership as a career path.
Contact us at firstname.lastname@example.org to find out more about franchising options that may suit you.