Traditional loan: Banks and credit unions are a source of financing for all businesses, including franchises. New franchise owners are 15% more likely than other new business owners to use a commercial bank loan, according to the SBA. Lenders are more likely to finance franchises of an established brand that has proved successful in a variety of markets. However, you’ll still be subjected to the bank’s underwriting standards and lending policies, meaning it will review your net worth and credit history. You also may need to put up collateral, regardless of the brand you’re associated with.
That is why you should use an administrative service to manage your loan, and give you a professional platform to raise the money and make payments to. This can make it easier for people you know to lend money to your business, and you won’t have to worry about any of the paperwork or tax implications. It could also improve your chances at getting funded.
The Small Business Association (SBA) has several financing programs available for businesses, including startups, and works with banks around the country to guarantee loans so small businesses can secure bank loans and get up and running quickly. The SBA works with entrepreneurs who do not have great personal credit, making it more likely that they can still start their business even with a less than perfect credit score. Visit SBA.gov to find out more about how the SBA can help you and get information for your region.
Some franchisors report being approached by financial brokers--historically more interested in big deals--to put together large pools of money using SBA and private funds. These funds would be available to franchisees through the franchisors like a trust fund. Groups of smaller banks with funds to invest would contribute to the fund from all over the country.
Starting a small business typically involves a lot of moving parts. In fact, time management can quickly become a challenge for entrepreneurs who are digging into the business start-up process for the first time. I compiled a list of 10 of the most important steps involved in starting a business and broke them down into easy-to-follow tutorials. Use this guide to make sure you're focusing your attention on the most important stages of starting a business and find out what you need to know so you can streamline your work for each of those steps.
Equipment loans. If you’re specifically looking for cash to fund the purchase of new equipment – including vehicles, manufacturing or production machinery, farming equipment, or other necessary equipment – then an equipment loan or leasing program may be what you need. Like business loans, equipment loans offer fixed interest rates and payment plans over a period of time.
Outside of the typical startup costs, there are different costs that are unique to franchise businesses. First is the franchise fee, an upfront fee to the franchisor for the right to use the company’s branding and model. It can be paid in a lump sum or in installments, and varies widely by industry and company. It will likely to be at least $10,000 – sometimes substantially higher – and is typically nonrefundable. Franchisors are also likely to charge recurring royalty and marketing fees – usually arranged as a percentage of sales at the franchisee’s store – usually 4 to 8 percent for royalties and 2 to 4 percent for marketing.
We designed this workshop to help you, a new business owner, understand and meet your federal tax obligations. This workshop is constructed so that the first three lessons... What You Need to Know about Federal Taxes and Your New Business, What You Need to Know about Schedule C and Other Small Business Taxes and Tax Forms; And How to File and Pay Your Taxes Electronically are for everyone, no matter what kind of business you have or whether you have employees.
Never start a business as a “sole proprietorship,” which can result in your personal assets being at risk for the debts and liabilities of the business. You will almost always want to start the business as an S corporation (giving you favorable flow through tax treatment), a C corporation (which is what most venture capital investors expect to see), or a limited liability company (LLC). None of those are particularly expensive or difficult to set up. My personal preference is to start the business as an S corporation, which can then easily be converted to a C corporation as you bring in investors and issue multiple classes of stock.
A franchise is a business that sell the rights to use its logo, name and model to individual entrepreneurs or a group of individuals working in partnership. Franchisees are required to make an initial upfront payment to begin the business, and are typically expected to pay ongoing royalty payments to continue to use the business’s branding and benefit from its brand-wide marketing efforts.
When starting out, your product or service has to be at least good if not great. It must be differentiated in some meaningful and important way from the offerings of your competition. Everything else follows from this key principle. Don’t drag your feet on getting your product out to market, since early customer feedback is one of the best ways to help improve your product. Of course, you want a “minimum viable product” (MVP) to begin with, but even that product should be good and differentiated from the competition. Having a “beta” test product works for many startups as they work the bugs out from user reactions. As Sheryl Sandberg, COO of Facebook has said, “Done is better than perfect.”
Startups should also understand that the venture process can be very time consuming—just getting a meeting with a principal of a VC firm can take weeks; followed up with more meetings and conversations; followed by a presentation to all of the partners of the venture capital fund; followed by the issuance and negotiation of a term sheet, with continued due diligence; and finally the drafting and negotiation by lawyers on both sides of numerous legal documents to evidence the investment.
You can also offer to pay interest, which shows you are serious about making your business successful. Your family should charge at least the applicable federal rate, which you can find at the IRS website: https://apps.irs.gov/app/picklist/list/federalRates.html. However, if they want to charge more, make sure they don’t go over your state’s maximum interest rate, which you can find online.
There are some apps that help to enhance your business on Instagram. One such app is liketoknow.it. This fashion app lets social media influencers tag their Instagram photos with the items in the picture as well as a link to a retail partner of liketoknow.it. If a follower buys an item through the link, both liketoknow.it and the influencer get a part of the profit. This app helps to introduces Instagram users to new items as well as allows influencers to be paid for their work.