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Franchises
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Article 4: Financing Options
You should expect to provide
about a third of the total capital for the
franchise, according to the International
Franchise Association. After scraping together
your personal savings and cashing in your
stocks, you may still need additional financing
for a low-cost franchise. It’s unwise to tap
personal credit cards because of high interest
rates. So, you need someone else’s money.
About a third of franchisors provide direct
financing programs, loan guarantees or leasing
programs. Many franchisors provide lists of
preferred lenders. As a franchisee, you’ll have
an advantage in securing loans because
franchises have the credibility, reputation and
experience of an established trademark. But,
you’ll still need a winning business plan to
attract the attention of outsider lenders.
Potential lenders include commercial banks and
independent financing companies. The SBA offers
competitive loan rates for longer terms.
Non-traditional sources include business and
industrial development corporations and private
venture capital firms.
Under-capitalization is a prime reason for
franchise failure. Although the franchisor gives
you an idea of initial costs, unanticipated
expenses can fluctuate and drain your money.
Don’t figure only startup costs. Make provisions
for enough money to open the doors and to
operate until you become profitable, which may
take months.
For a free “net worth calculator” to determine
your financial qualifications, check this Web
site:
www.franchiseopportunities.com/networth.asp |
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