The International Franchise Association maintains a directory of franchises that are approved by the SBA to receive SBA funding. Each franchisor in the directory is required to submit a Franchise Disclosure Document (FDD) with information about its company to the SBA for approval. Working with a company that is pre-approved by the SBA will expenditure the process of obtaining an SBA loan for your franchise.
“My credit is very strong and I owned my house outright. So when I realized the SBA loan would take too long, I decided to go to my personal bank and apply for a HELOC. The whole process took less than two weeks, the interest rates were great, and I never looked back. I was even allowed to use the HELOC for my franchise fee, which other financing wouldn’t allow.”
The idea here is to get clear about what’s important to you, where exactly your passion lies, and what the point of the whole venture is. As a small business owner, it’s easy to get caught up in the minutiae of paying bills, writing the website copy, changing the website copy several dozen times, filling out tax forms, and so on. Don’t lose sight of the big picture.
For existing franchises looking for working capital, another form of alternative financing comes from monetizing the franchise’s balance sheet to obtain funding. Using the franchise’s commercial real estate, or by tapping into the franchise owner’s personal real estate, an asset based lender can collateralize the real estate and provide working capital up to 90% of the real estate’s equity.
Follow – After you’ve set up your account and have a clear branding strategy in place, it’s time to start working on gaining visibility on Instagram. You should follow as many people who are relevant to your business as possible. For example, influencers, brands with complementary products and past customers. Read this blog for a guide on how to use social media influencers to promote your business.
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There are many private lenders or financial institutions that would be willing to entertain your loan application with no collateral, provided you offer some personal guarantee. You may use a cosigner, offer some asset or real estate as security or any kind of infrastructure or commodity that is worthwhile. This option is not strictly unsecured but there is the option to use various kinds of assets or commodities as personal guarantee which may work for many business owners. The interest rates of private lenders would be quite high as such loans don’t have backing of the government.
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ApplePie Capital (see our review) is an online lender that specializes in franchise financing. Founded in 2014, ApplePie was one of the first online lenders to offer franchise financing. After recently acquiring another franchise lender, ApplePie has expanded its offering to include SBA-backed loans, equipment loans, and conventional loans, in addition to its original “core” 3-7 year loan.
Having liquid assets, valuable collateral and a good credit rating will go a long way to helping you get a franchise loan. According to The Wall Street Journal, most banks will be looking for around one-fifth or 20% of franchise startup costs to come from the owner before considering lending options, and without a good credit score, most lenders won't feel comfortable extending a loan even if the proposed franchise is known for long-standing success.
A ROBS let’s you fund all, or part, of your new franchise with retirement savings (401k, IRA, 403b, etc) without paying early withdrawal penalties and taxes. If you have at least $50,000 in your eligible retirement account a ROBS can help you fund 100% of your franchise, be combined with seller financing, or be used as a downpayment for an SBA loan. Learn more by speaking with our recommended ROBS provider, Guidant, who offers an initial free consultation.
When you do a ROBS, you basically sponsor a retirement plan under your franchise, rollover funds from your personal retirement plan to the company retirement plan, and use those funds to buy shares of stock in your business. The sale of stock creates the capital needed to start or buy a new franchise or recapitalize an existing franchise. Read our in-depth guide on ROBS to learn more about how it works.
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But even if you’re not an internet startup or these techniques don’t feel right to you, you can still take steps to get money coming in quickly. If you run a service-based business, you can structure contracts so that clients have to pay a certain amount up front or at agreed milestones, instead of all at the end. With long-running projects, this can make a big difference to your cash flow. You can also offer special discounts and limited-time offers for people who sign up as early customers.
As the saying goes: "The only certainties in life are death and taxes." Unfortunately, this is also true if you start a business in Australia - you absolutely must register for the correct taxes to avoid any potential legal implications. The taxes you must register for are dependent on the type of business you choose to start, with some applicable to every type and others only mandatory for certain types.
There are several loan programs aimed at helping first-time entrepreneurs set up their business. The Small Business Administration (SBA) operates the loan programs offered by the U.S. government. To qualify for the loan, your business must meet some criteria such as your business must operate in the United States, your business must qualify as a small business according to SBA guidelines, you must operate for profit and you should have a good credit score.
If you have all of the answers above, and are still unsure of what to do then we suggest working with your franchisor to find the best option for your new business. This can be the best place to start when searching for franchise financing, because they’re very experienced with where other franchises like yours have gotten their financing from.The franchisor also has a vested interest in you being able to purchase the franchise and will often provide some kind of help.
Your place on the credit spectrum is one factor that will determine which loans you’ll qualify for. You can get your credit report for free from each of the three major credit bureaus — Equifax, Experian and TransUnion — once a year. You can get your credit score for free from several credit card issuers as well as personal finance websites, including NerdWallet.