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 Learn To Operate Your Own Business Franchise FinanceAs traditional funding sources dry up, franchisees have to get creative. Try one of these alternative funding strategies:Direct Finance - Some franchise companies will provide direct finance to their franchisees. They will accept a promissory note for part or all of the initial franchise fees owed (think of seller financing). But it can also involve more extensive lending if the franchisor is financially strong enough to provide such a program. Third-Party Lenders - Other franchise companies have arranged indirect financing or leasing programs for their franchisees with third-party lending vendors (think equipment leasing). In some cases, such programs require the franchise company's corporate guarantee. Angel Investors - Some franchise companies have established relationships with angel investors (think partnership). Individual and corporate investors are always looking for good upside potential to increase their returns. These types of loans typically require an equity participation "kicker" as part of the overall package. Though such a provision may end up making the loan more expensive, it may be the only viable option available to the prospective franchisee. Cash - One of the strategies that many are using right now is to focus on lower investment franchises (think cash is king). There are many service or B2B franchises available with a lower initial investment than the typical retail or fixed-location startup. If you can find a franchise that meets your income goals and needs for less than $10,000 - $100,000,you may be able to fund the entire investment with cash. Savings - Other prospective franchisees are accessing their retirement plan dollars to invest in their franchise. Compared to the stock market, investing dollars into a business that's under your own control has more appeal than ever. This strategy uses a self-directed IRA and carries a big caveat: any such program must be set up to comply with all banking, legal and IRS regulations. |
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