7 Questions to Ask Before Financing Your Franchise

Creating your own business has become more and more popular due to less stability in the job world. It may have always been a dream of yours to establish your franchise but at times it can seem out of reach. The good news is you don’t need a ton of money to invest right away since they’re plenty of options to help. Here are seven questions to ask before financing your franchise to help you get started. 

Do I Need to Have Money Saved?

It’s always great to have a large amount of money in your savings account but if you don’t that doesn’t mean it’s the end of the line for you. Taking out a loan is always an option but if that isn’t the right fit, you can begin by saving. Setting aside a certain amount of money every once and a while will help you determine when you’ll be ready to begin. Temporarily borrowing from a retirement fund is possible as well if you have the means to pay it back at a later date. 

What is My Budget? 

As we all can imagine there are a lot of costs that come with owning a business. It’s important to take into consideration expenses such as a real estate lease, business licenses, inventory, payroll, plus your salary. Building the first-year budget will be crucial to stay afloat and not have to shut down or sell your franchise. 

Do I Need Good Credit?

Having a good credit score already does put you a step ahead. You’ll have a better chance of getting approved for small business loans. If your credit isn’t the best, a good idea is to start getting back on track. Once you’ve built a better score the loan application process will become a lot easier for you.

How Long Does it Take to Make a Profit? 

Since every business is different there’s no set time to know exactly when the profits will start rolling in. A way to get a better idea is to speak to other franchise owners to learn about their experiences. This will also help you build a proper budget so everything goes smoothly in your first year and beyond. 

What are the Financing Options? 

Thankfully you have a variety of options when it comes to financing. The first step is usually to ask your franchisor if they offer any in-house financing. This is known as the Franchisor Funding option. Some may offer to fund for different things like lease equipment or the franchise fee. Next is the IRA / 401(k) Business Financing. Your retirement plan could allow you to qualify for an investment without taking a loan. Another choice is the Line of Credit, which simply means taking out a line of credit from your bank. Lastly is the SBA Loan or The Small Business Administration Loan. SBA works with banks to offer low-interest rates to franchise owners. 

What is My Net Worth? 

A simple definition of net worth is the sources of your wealth minus the debts that you owe. The amount of your net worth helps franchisors determine how well you manage your money. A higher net worth lets the franchisor know you’re responsible when it comes to money and opportunities. 

Should I Take on an Investor? 

Taking on an investor will allow you to receive cash injections. Just be aware once you take one on, they now own equity in your company and will have some sort of say when it comes to business operations and decisions. If you’re interested in having a partner this would be a great fit for you. An outline of terms is a great way to establish how much power your partner will have in your business. 

Now that you know some basics when it comes to financing a franchise, Franocity is here to help make your dreams a reality. Contact us to get started on finding your perfect franchise match. Call today at (561) 609-6200 to receive a free franchise consultation or fill out the form below!

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