Disclaimer: Communications between you and LegalZoom are protected by our Privacy Policy but not by the attorney-client privilege or as work product. LegalZoom provides access to independent attorneys and self-help services at your specific direction. We are not a law firm or a substitute for an attorney or law firm. We cannot provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options, selection of forms or strategies. Your access to the website is subject to our Terms of Use.

Starting a small business doesn't have to require a lot of money, but it will involve some initial investment as well as the ability to cover ongoing expenses before you are turning a profit. Put together a spreadsheet that estimates the one-time startup costs for your business (licenses and permits, equipment, legal fees, insurance, branding, market research, inventory, trademarking, grand opening events, property leases, etc.), as well as what you anticipate you will need to keep your business running for at least 12 months (rent, utilities, marketing and advertising, production, supplies, travel expenses, employee salaries, your own salary, etc.).
If you prefer a little more guidance as you search out a franchise opportunity, consider hiring a consultant to locate the perfect opportunity. Consultants gather information on your financial situation and preferences and give you a few options that fit. However, make sure you’re working with a reputable franchise consultant. Ask questions about franchisees they’ve successfully helped and contact those franchisees as references.
Hi Rose, generally a business loan or mortgage will not appear on your personal credit report unless you signed a personal guaranty; if you personally guaranteed the loan, there is a chance it may appear on your personal credit report — but then again, it might not. It’s a good idea to check your credit report for any issues before you apply to any loans.

If you're thinking about starting a business, you likely already have an idea of what you want to sell, or at least the market you want to enter. Do a quick search for existing companies in your chosen industry. Learn what current brand leaders are doing, and figure out how you can do it better. If you think your business can deliver something other companies don't (or deliver the same thing, but faster and cheaper), you've got a solid idea and are ready to create a business plan.
Many banks and credit unions offer financing for franchise purchases, so be sure to compare any franchisor lending rates and terms with these. When you approach a bank, be prepared to disclose all your financial information. While your credit rating is important, you’ll also need to provide a personal financial statement, copies of tax returns and information about the source of your down payment funds.
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.
Jeff White is a staff writer and financial analyst at Fit Small Business, specializing in Small Business Finance. As a JD/MBA, he has spent the majority of his career either operating small businesses (in the retail and management consulting spaces) or helping them through M&A transactions. When he is not helping small businesses, he spends his time teaching his five kids how to become entrepreneurs.

5. Social Media: Depending on your type of business, you will want a social media presence. LinkedIn, with more than 380 million members, is regarded as the business site for connecting with other businesspeople and offers excellent posting features for articles and blogs. Facebook is more of a social friends site than a business-focused site, but it’s also an excellent tool for “getting your word out” to your friends and customers. Both Linkedin and Facebook allow you to set up a commercial page for your new business.
The ability to communicate effectively can be critical to landing customers, inspiring employees, and pitching to investors to raise capital. Most people are not very good at public speaking and many are even afraid of it. You must strive to overcome this fear. Consider working with a public speaking or business coach to improve your public speaking skills. Some of the most recognized entrepreneurs, such as Apple founder Steve Jobs, were known for being great public speakers.
Chris Guillebeau is a writer, entrepreneur, and traveler. His latest book, The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future, is now a New York Times bestseller. During a lifetime of self-employment and ventures ranging from online publishing to volunteer work in West Africa, he has visited nearly every country on earth before the age of 35. Host of the World Domination Summit, an international gathering of creative people, Chris is focused on encouraging individual quests while also “giving back.” His main website, ChrisGuillebeau.com, is visited by more than 300,000 people a month.

Are you thinking about starting a small business, freelancing, or turning a hobby into a full-time job? Or perhaps you're already running your own business and need some inspiration to take it to the next level. Each week, join small business coach Dave Crenshaw for two short lessons that reveal the secrets of running a successful small business. This series covers topics such as getting started, writing a business plan, determining your most valuable product or service, hiring people, managing processes, documenting systems, bootstrapping, seeking funding, accounting, controlling costs and profit margins, marketing, creating culture, and more.
If the franchise you're considering doesn't offer equipment leasing, look into nonfranchise, nonbank companies that specialize in equipment leasing for franchises. These types of financing companies will often provide asset-based lending to finance franchisees' furniture, equipment, signs and fixtures, and will allow franchisees to purchase the equipment at the end of the lease. Keep in mind that you may lose some tax advantages under the current law if you lease that equipment.

It is important to protect your company’s intellectual property (IP). Ever wary of minimizing burn rate, startups may be tempted to defer investment in intellectual property protection. To those who have not tried to protect intellectual property, it feels complex and expensive. Too often, startups end up forfeiting intellectual property rights by neglecting to protect their ideas and inventions.
One noticeable trend in most businesses of all kinds today is technology. Workers and business owners cannot deny how it has influenced and advanced the world of commerce. In particular, technology has made it easier for franchises as they need sophisticated systems to manage the complexity of their trade. By their size, even the smaller franchises require this approach. Thus the most significant concept observed among franchises is software that is not installed on a computer, but instead consists of the web. The point of this approach is to take all the software programs usually equipped with a company’s personal computers and move them to the internet. There, they are presented in a single and secured environment accessible from any Internet-connected device, be it a tablet, computer, or phone. Examples of this development can be found with software solutions such as Nextstep Systems, Hello Scheduling, VST Inc, and Steller Restaurant Solutions to name a few. Still, internationalization of franchises continues to be a strong trend within the industry. Many countries are always willing to pay large amounts of money to use western trademarks along with the training and knowledge that come with the territory.  Over 400 franchises are operating internationally, proving to be a thriving option. Furthermore, the Franchise Trade Commission also facilitates business deals for American companies abroad confirming the demand for an American disposition.
There are more than 28 million small businesses in the United States, making up a whopping 99.7 percent of all U.S. businesses, according to the Small Business Administration. When you consider some of the most popular reasons to start a business, including having a unique business idea, designing a career that has the flexibility to grow with you, working toward financial independence, and investing in yourself — it's no wonder that small businesses are everywhere.
Becoming a small business owner has unique challenges and rewards that aren’t right for everyone. You must be driven, disciplined and able to identify a product or service that people need — one that they will pay enough for to allow you to live comfortably. You have to develop marketing skills and be able to find your own work, because it won’t fall into your lap until after you’re well established. Business owners need to understand how to budget, keep records and handle small business taxes. They must familiarize themselves with employment laws if they want to hire staff. They also need a plan for protecting their business and everything that’s tied to it if something goes wrong. (For more, see Are You An Entrepreneur?)
5. Social Media: Depending on your type of business, you will want a social media presence. LinkedIn, with more than 380 million members, is regarded as the business site for connecting with other businesspeople and offers excellent posting features for articles and blogs. Facebook is more of a social friends site than a business-focused site, but it’s also an excellent tool for “getting your word out” to your friends and customers. Both Linkedin and Facebook allow you to set up a commercial page for your new business.
Becoming a small business owner has unique challenges and rewards that aren’t right for everyone. You must be driven, disciplined and able to identify a product or service that people need — one that they will pay enough for to allow you to live comfortably. You have to develop marketing skills and be able to find your own work, because it won’t fall into your lap until after you’re well established. Business owners need to understand how to budget, keep records and handle small business taxes. They must familiarize themselves with employment laws if they want to hire staff. They also need a plan for protecting their business and everything that’s tied to it if something goes wrong. (For more, see Are You An Entrepreneur?)

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.
Shelton advises entrepreneurs to apply for a larger loan once they have the numbers to prove that they are growing: “What you’re hoping to get from these smaller loans is traction,” which you can use to “pitch [your story] as a growth story” when you apply for a larger traditional loan from a bank. Proving that you have experience growing your business from someone else’s money will help you convince the bank that you can do the same with their loan.
Banks and credit unions are traditional sources for small business loans, and they’re a good place to start. Especially with small institutions, you’ll be able to meet with a lender who can guide you through the process. Larger banks might take a more hands-off approach. To improve your chances of getting approved, ask about SBA loans, which reduce the bank’s risk and feature interest rate caps. The loan process at banks and credit unions can be slow, so be prepared for a long process and a thorough review from the bank.

To start your application for a business loan, calculate how much money and what kind of loan you need. Then, gather the necessary documents, including a profit and loss statement, balance sheet, cash flow statement, tax documents, and a detailed business plan. Once you have all of your information, approach lenders, such as the Small Business Administration, banks, and credit unions, and complete the application for the best loan for your needs. Finally, wait to hear back from the lender and be sure to thoroughly review the terms of your loan.


Small business line of credit. Under a small business line of credit, your business can access funds from the lender as needed. There will be a cap on the amount of funds accessible (e.g., $100,000) but a line of credit is useful for managing a company’s cash flow and unexpected expenses. There will typically be a fee for setting up the line of credit, but you don’t get charged interest until you actually draw down the funds. Interest is typically paid monthly and the principal drawn down on the line is often amortized over years. However, most lines of credit require renewal annually, which may require an additional fee. If the line is not renewed, you will be required to pay it in full at that time.
Overcoming this problem is easier than it used to be, thanks to the plethora of marketing opportunities on the internet. Many of them, of course, are free or low cost, but don’t forget that your time is also an investment. So don’t make the mistake of signing up for every social media site out there and letting your valuable time dribble away in tweets and status updates.

Negotiate the startup and operating costs: When you buy a franchise, there is a pretty long list of things that you need to buy before you can open the doors to customers. The cost for such items will be noted in the Franchise Disclosure Document. If you negotiate, the franchisor may be willing to absorb the cost of some of these items for you, like discounting your franchise fee.


Proof of ability to pay: As Ali told me, banks want to be sure you’re positioned to make the loan payment on time each month. You’ll need to present detailed financial statements showing that your income is at least 1.25 times your operating expenses, including the new repayment amount. For example, say your business makes $15,000 a month and your current expenses are $10,000. With the loan repayment added to your operating expenses, you need to be sure your income still exceeds the recommended 1.25 threshold.
1. Strategic Plan. All of us have heard of a “back-of-the-napkin” story about how a small idea turned into a successful business—and these stories do happen. However, it is typically the basic concept that happens on the back of a napkin, not the actual plan to bring that concept to the market. The first step is to develop a well-thought-out business plan that addresses key success factors such as:
Reviewing the brands franchise disclosure document (FDD), speaking with existing franchisees and financial professionals, in conjunction with support from the franchisor, will help you formulate your business plan and build financial projections. Outlining your management and marketing skills, past successes and future goals by including resumes for yourself, planned partners and other employees will allow all parties involved, from the franchisor to lenders, to understand the strengths of the ownership and management team. Personal credit history and financial strength will also play an important role in opening a franchise business.
Are you thinking about starting a small business, freelancing, or turning a hobby into a full-time job? Or perhaps you're already running your own business and need some inspiration to take it to the next level. Each week, join small business coach Dave Crenshaw for two short lessons that reveal the secrets of running a successful small business. This series covers topics such as getting started, writing a business plan, determining your most valuable product or service, hiring people, managing processes, documenting systems, bootstrapping, seeking funding, accounting, controlling costs and profit margins, marketing, creating culture, and more.
Small business line of credit. Under a small business line of credit, your business can access funds from the lender as needed. There will be a cap on the amount of funds accessible (e.g., $100,000) but a line of credit is useful for managing a company’s cash flow and unexpected expenses. There will typically be a fee for setting up the line of credit, but you don’t get charged interest until you actually draw down the funds. Interest is typically paid monthly and the principal drawn down on the line is often amortized over years. However, most lines of credit require renewal annually, which may require an additional fee. If the line is not renewed, you will be required to pay it in full at that time.
To find out the best ways for new business owners to secure loans, I consulted with experts who have a wide range of experience with funding businesses including Jared Hecht, CEO of the online lending website Fundera, David J. Hall from the Small Business Association, Hal Shelton who is a SCORE mentor and author of The Secrets to Writing a Successful Business Plan (Summit Valley Press 2014) and Larry Conley, Senior Vice President and Specialty Finance National Manager for Chase bank.
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.
Your first option is to change your business model to demand fewer needs as listed above. For example, if you were planning on starting a company as a consultant or freelancer, you could reduce your “employee” expenses by being the sole employee at the start. Unless you need office space, you can work from home. You can even do your homework to find cheaper sources of supplies, or cut out entire product lines that are too expensive to produce at the outset.
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.
LendingTree, LLC is a Marketing Lead Generator and is a Duly Licensed Mortgage Broker, as required by law, with its main office located at 11115 Rushmore Dr., Charlotte, NC 28277, Telephone Number 866-501-2397 (TDD/TTY). NMLS Unique Identifier #1136. LendingTree, LLC is known as LT Technologies in lieu of true name LendingTree, LLC in NY. LendingTree technology and processes are patented under U.S. Patent Nos. 6,385,594 and 6,611,816 and licensed under U.S. Patent Nos. 5,995,947 and 5,758,328. © 2016 LendingTree, LLC. All Rights Reserved. This site is directed at, and made available to, persons in the continental U.S., Alaska and Hawaii only.
There are infinite sources of financing available to help you launch the franchise of your dreams. However, operating a franchise with no reserves and blinding yourself to unexpected business problems can lead to disaster. A good rule to remember: Never invest more than 75 percent of your cash reserves. If you have $10,000, invest $7,500. If you have $25,000, invest $18,750.

Get matched with a mentor who has experience building a business by visiting SCORE.org. SCORE is dedicated to helping small businesses develop and thrive through mentorship and training programs. SCORE mentors can help small business owners write a business plan, determine the type of lending they need, figure out the best bank(s) to approach for a loan and prepare to meet with a loan officer.


One noticeable trend in most businesses of all kinds today is technology. Workers and business owners cannot deny how it has influenced and advanced the world of commerce. In particular, technology has made it easier for franchises as they need sophisticated systems to manage the complexity of their trade. By their size, even the smaller franchises require this approach. Thus the most significant concept observed among franchises is software that is not installed on a computer, but instead consists of the web. The point of this approach is to take all the software programs usually equipped with a company’s personal computers and move them to the internet. There, they are presented in a single and secured environment accessible from any Internet-connected device, be it a tablet, computer, or phone. Examples of this development can be found with software solutions such as Nextstep Systems, Hello Scheduling, VST Inc, and Steller Restaurant Solutions to name a few. Still, internationalization of franchises continues to be a strong trend within the industry. Many countries are always willing to pay large amounts of money to use western trademarks along with the training and knowledge that come with the territory.  Over 400 franchises are operating internationally, proving to be a thriving option. Furthermore, the Franchise Trade Commission also facilitates business deals for American companies abroad confirming the demand for an American disposition.

Various financial aid programs help certain types of businesses and borrower start up franchises. For instance, some companies have programs designed to attract women and minority candidates. Many others offer discounts on franchise fees for veterans who are interested in franchising. You can find a list of options in the International Franchise Association’s VetFran Directory.
Franchising is the licensing of an existing business model and brand, where a business owner is given the right to market the trademark of an existing business in exchange for fees and a percentage of the business’ profits. Franchises are a pervasive way to do business now. Companies selling the rights to their name or logo to third-party retail outlets is so familiar that its hard to drive down the block of any city and not see a franchising business. Some examples of well-known franchises included Subway, UPS, and H & R Block. Still, there are methods most should follow today—as a potential investor or owner—to sustain and have long-term success. These trends include an increase in technology, specific age group influence, and fast-food restaurants and practices that are changing the franchising industry and taking it to new territories.
Visuals – As Instagram is a visual platform, special attention has to be given to the visual aspect of your posts. As well as choosing a color scheme to match your brand, you should also use a consistent filter. Using the same filter for your posts will help users recognize your images. For instance, Madewell’s Instagram incorporates its color scheme for consistent images and branding.

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.
And don’t forget that unlike their independently-owned competitors, franchise owners don’t get to choose when to schedule expenses or which suppliers to work with. Their business model might have been passed down by the franchisor but it’s up to the franchise owner to figure out how to grow the business without endangering profits or failing to cover mandatory expenses.
A Rollover for Business Startups (ROBS) lets you take retirement funds from a 401(k), traditional IRA, or other eligible retirement account and invest them in your franchise, without having to pay taxes or an early withdrawal penalty. You can fund all or part of your business through a ROBS. Funds from a ROBS can be used as a down payment on larger financing, like an SBA loan, or to bridge the gap between other piecemeal loan financing options, like equipment leases, etc. Funds from a ROBS can also be used for franchise fees, consulting fees, and other costs that traditional loans often can’t be used for.

There are lots of options when you want to borrow money, however, one of the challenges that you have to face is when you have bad credit score. Banks will most likely decline your application for a loan, and while there are firms who claim that they don’t look at your credit scores, there may still be other requirements. Before getting a loan, Biltmore Loan and Jewelry (biltmoreloanandjewelry.com) advised to identify first if you really need it, remember that you are committed to paying the money back so if the purchase is not necessary, you might as well skip on getting a loan. But if it is extremely important like paying the tuition or you lack funding for a business, then it would justify your need to borrow money. Aside from list given above, you may also consider getting a collateral loan like a car title loan which would allow you to borrow money using your car title as collateral but you get to keep your vehicle. In addition, a land title loan will also work out for you so you can get cash to fund your business regardless of your credit scores.
According to Hecht, online lenders tend to stay away from lending to startup businesses: “The longer you’ve been around, the easier it is for you to get funding from an online lender.” Even though his business is based on online lenders, “we’re not anti-bank,” says Hecht. He advises every entrepreneur to begin their financing process by going to their local bank first to see what they have to offer.

Starting a business involves a lot of moving factors, but the most important one is financing. You are going to need to spend some time evaluating your business model and writing your business plan before you can really determine the type of loan you need and the best way to secure that loan. As your business grows, your lending needs will change, so take the time now to understand the differences between lending and investing so you can be ready when your company starts to grow and needs to adjust its financing.


There are probably understandable reasons for your bad credit. Most of us are still bouncing back from the recession, and some businesses were hit harder than others. Whether or not you decide to get a “bad-credit loan,” building up your credit is planning for the future of your company. Once you raise your credit score, it will be much easier to secure funding as your company grows.
×