Our franchise clients have been recommended a variety of business funding programs such as merchant cash advances or short-term working capital loans. Both options can allow you to cover a massive upfront cost, increase staff, launch a local ad campaign or pay a series of coinciding bills. Since profit margins for restaurants and retailers are already on the low side, we can provide the means to make important payments ahead of schedule and lessen the blow from weekly deductions.
Thousands of people have become millionaires through their stock options (Facebook being one famous example), making this form of benefit very appealing to prospective employees. The spectacular success of some Silicon Valley companies and the resulting economic riches of those employees who held stock options have made Stock Option Plans a powerful motivational tool for employees to work toward the company’s long-term success.
“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.”
4. You get tax benefits. Oh yes. This even applies to freelancers. Depending on the type of business you register as, you could write off a number of your expenses including travel, telephone bills, food, portions of repayments on things like cars, and so on. And, depending on the business you start, there may also be various government incentives. If you’re unsure about what to do and how to register, I strongly advise speaking with your accountant about the tax benefits you could be eligible for.
Most lenders are interested in how long you've been at a certain job or lived in the same location, and whether you have a record of finishing what you start. If your past record doesn't show a history of stability, then be prepared with good explanations. Not only is the amount of income you earn important but so is your ability to live within that income. Some people earn $100,000 a year and still can't pay their debts, while others budget nicely on $20,000 a year.
If you can secure a credit card in your company name and make purchases and on-time payments, you can get financing and start building good business credit at the same time. Of course, the credit limit, interest rate, and terms of payment will vary, and each bank or credit union will have eligibility requirements, so this option will not work for everyone.
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.
Though the fastest growing entrepreneurs were entering this business model are Millennials. Franchising at a rate that cannot be ignored; the latest Census data shows that 66% of Millennials are interested in entrepreneurship, nearly making up 30% of all entrepreneurs are between 20-24 years old, and over 25% are self-employed. Additionally, they launch 160,000 start-ups each month motivating the IFA (International Franchise Association) to start the NextGen Franchise initiative that recognizes and supports young entrepreneurs. The IFA is going as far as reaching out to this generation while their still in school, introducing them to the benefits and possibilities of franchising offered through education, scholarship, and leadership. Another age group making up a large part of the market are the baby boomers and seniors. More services being developed are quality of life/wellness products, patient advocacy, non-medical home care, and respite care. And lastly, there are an increase in businesses interested in kids and child enrichment that is thriving and showing no signs of slowing down. Each has displayed an interest in getting kids moving, reading, thinking, and believing in themselves. These businesses have provided a sense of accomplishment and community within a supportive environment. Therefore, a trend of development centered around fitness, sports, music, art, STEM (science, technology, engineering, and math), tutoring, and child care have grown immensely. However, with the trends centering around technology, the food industry, and the distinct influence of individual age groups, franchising is proving to be a flourishing industry with a positive future.
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.
So it pays to have a comfortable cushion, just in case things don’t pan out as expected. And it’s much easier and cheaper to arrange funding when times are good than it is when you’re desperate. Of course, you don’t want to be paying interest on unnecessary debt either, but there are funding options, like lines of credit, that you only pay for when you activate them. In any case, it’s worth researching your options early on.
Before you can get a traditional bank loan, you need to have collateral, generally in the form of your house although other assets including land, cars, watercraft, motorcycles and equipment that has a title of ownership can be used as collateral. Understand the risk involved with your business venture before you put up collateral–the bank will take your house, car or whatever else you put down if you default on your loan. Make sure you have an accurate assessment of what your collateral is worth before you apply for a loan so you don’t wind up unpleasantly surprised when your bank assumes it’s worth today’s market value, not the value that it was when you bought it. If you don’t have an asset to use as collateral or are uncomfortable with the idea, then you’ll want to seek out a source other than a bank for your business lending needs.
While many business experts believe that you should get into a business you are passionate about, it is important that you consider the market’s demand as well as your target demographics. You can’t start a business about something you love and expect people to patronize your services or your products on the get go. The success of a franchise hinges on a lot of factors, but demand and the target market should top your list.
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.
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Often times, a franchisee looking to open their first franchise will fit nicely into a Small Business Administration (SBA) loan product. SBA loans are made by banks or other participating lenders - not the government. SBA loans allow the lenders to extend credit to borrowers, who they may not be able to lend on a conventional basis, by taking advantage of a guarantee that the SBA provides to the lender in the event of default. There are a few different options, but the Flagship SBA 7a product gives the bank a 75% guarantee if your loan defaults - so that the money that the bank lends to you is not entirely at risk. SBA loans are typically priced at Wall Street Journal Prime + 1 to 2.75%, for terms of 7 to 25 years, depending on the use of funds.
Aira, business debt is a different animal than consumer debt. It’s one thing to go into debt buying nice furniture, big tvs, vacations, etc. It’s another thing to go into debt to get bulk inventory discounts, finance equipment, expand restaurant seating, or anything else that will turn $1 of debt into $2 of revenue, for example. That’s what business loans are typically used for.
A lender is primarily concerned about the ability of the borrower to repay the loan. To the extent that a security interest can be given to the lender on company assets (company equipment, property, accounts receivable, etc.), the borrower should be able to increase its chances of getting a loan on favorable terms. Some lenders may insist upon the personal guarantee of the principal owner of the business. That is best avoided if possible as it puts the owner’s personal assets, and not just the business assets, at risk.
For-profit lenders are reluctant to issue loans to anyone who does not have a strong credit report and financial history. That is not the case with government small business loans. Obviously, a decent credit report is important, and you will have to follow the guidelines regarding the repayment period and the interest rate set by the government, but usually the interest rates charged by government loans are lower than those you could expect in the private sector.