No business lender is perfect. A lot of them try (and get pretty close) but sometimes, the biggest advantages can lead to polarizing disadvantages. Take OnDeck Capital, for instance. This online business lender is widely-praised by all kinds of small business owners, and rightfully so. OnDeck’s application requires minimal paperwork, you can get funded in […]
A franchise merchant cash advance (MCA) is a short-term loan that provides capital to franchises that need funding quickly. Approval for a merchant cash advance can take a matter of minutes, and funding can be completed in as little as 24-48 hours. Merchant cash advances work by having a funding company purchase a portion of your franchise’s future receivables at a discount, with an upfront payment to the franchise. After funding the funding company will then collect repayment by splitting each days credit card batches with the franchise.
Make sure you do your research before diving into any franchise brand by checking out the International Franchise Association or the SBA Franchise Directory. Read a franchise disclosure document carefully before signing any franchise agreement, and be sure you’re ready to commit a relationship with the franchise brand of your choice. Happy applying and best of luck buying a franchise!
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.
To get a good estimate of costs, the first thing we recommend doing is asking the franchisor for their Franchise Disclosure Document (FDD) early on in the process. It’s a good idea to have an accountant and lawyer review the FDD with you before you sign any paperwork or hand over any money. A franchisor is legally required to give you the FDD at least 14 days before you buy a franchise.
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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.
If you are new to franchise ownership, be sure to do your research and due diligence about the franchise system you’re interested in. Study the Franchise Disclosure Document (required by law) and speak to other franchisees about the brand and the financing program on offer. Next, try to understand what your financial responsibilities as a franchise owner will be. This blog offers some pointers on this: Buying a Franchise – How to Determine What it’s Going to Cost You.
Alternative lenders: Once you have your franchise up and running, you’ll need funding to work through seasonal ups and downs, purchase new equipment and possibly open another location. If you’re still having a hard time finding traditional funding, alternative lenders may help fill the gap. They tend to be quicker than traditional loan providers — some even fund within a day — and have looser qualification standards. However, annual percentage rates for alternative lenders typically are higher, so make sure you review your total cost of borrowing before deciding on a loan.
Length of lease term. Landlords are typically willing to make concessions for longer-term leases. However, your company’s needs may change and you could find yourself locked into a lease for an office space that is too small, too big, or with rent that is above-market if demand for space subsequently declines. Try to negotiate a shorter-term lease with renewal options—a two-year lease with a two-year renewal option, for instance, rather than a four-year lease.
SmartBiz (see our review) is a viable online loan option for franchise owners that want the security and low-interest rates of an SBA-backed loan, but with the ease and speed of an online loan. SmartBiz is the #1 marketplace for SBA 7(a) small business loans online, offering an SBA/online loan hybrid with low interest rates and long-term repayment terms. However, this lender is only an option for established franchises — you’ll need at least 2 years’ time in business to get a working capital or debt refinancing loan, and 3 years to be eligible for a commercial real estate loan.
Real estate investment is a great business. However, the SBA will not guarantee loans for business that do what they consider speculation. Unfortunately, real estate investment is considered speculation. We may be able to get you a non SBA business line of credit up to 150K. If you are interested, please fill out our pre-qualification form and we will schedule a call to go over your options. https://keycommercialcapital.com/prequalify/
How do so many small businesses get started? It all begins with the right type of financing. Whether you're just starting up or you're expanding your existing business, you need money to get rolling. This guide will help you figure out the type of loan you need for your business and will look at the step-by-step process of securing a business loan:
To comfortably repay your loan each month, your total income should be at least 1.25 times your total expenses, including your new repayment amount, Darden says. For example, if your business’s income is $10,000 a month and you have $7,000 worth of expenses including rent, payroll, inventory, etc., the most you can comfortably afford is $1,000 a month in loan repayments. You can use Nerdwallet’s business loan calculator to determine your loan’s affordability.