He is president of Toister Performance Solutions, Inc., a consulting firm that helps companies improve customer service. Jeff has appeared on numerous lists of top customer service experts including Global Gurus' World's Top 30 Customer Service Professionals, ICMI's Top 50 Thought Leaders to Follow on Twitter, and HDI's Top 25 Thought Leaders in Technical Support and Service Management.
Assignment and subletting. Startup companies should negotiate enough flexibility in the assignment and subletting clause to allow for mergers, reorganizations, and share ownership changes. Watch out for a clause that says a change in more than 50% of the company’s stock ownership will be deemed an assignment that is prohibited without the landlord’s prior approval. As your company grows and new people invest in it, this clause can be inadvertently triggered.
Ideally, your business will operate long enough and become successful enough that the company will get its own credit score and be able to qualify for a loan on its own. Building a business credit score requires your company to establish its own identity, including having its own tax ID number or employer ID number, obtained from the IRS. You'll typically also need a business credit card in the organization's name that's always paid on time.
Your business plan is essential to get approved for a loan. If you don’t have one yet, it’s time to create one. You need to show, with specific numbers, how you’ll earn money, how you’ll spend it, and your big-picture strategy. Explain who all of the players are in your business, especially management, marketing, and sales roles – those individuals will bring in new business that helps pay for the loan. It’s okay if you do all of those jobs – just explain why that is and your track record of success in those areas.
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.
Brad has spent more than twelve years working at the crossroads of business development, marketing, and social media. He was featured in Entrepreneur Magazine as a young entrepreneur, launching his first successful business at the age of 15. Up until joining lynda.com as an online marketing manager in 2012, he honed his skills working as a consultant alongside brands large and small, including LegalZoom, Clear Channel, eSolar, Dickies, and Urban Outfitters. He has also served as an advisor to multiple startups, providing marketing direction and strategic advice.
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.
Tenant improvements. Your new space may need some improvements or alterations (a new paint job, new carpeting, a reconfiguration of the space). Which party will pay for these improvements depends on how tight the commercial office space market is in your city. Most form leases stipulate that the tenant can’t make any alterations or improvements without the landlord’s consent. Ask for a clause that says you can make alterations or improvements with the landlord’s consent, and that the consent won’t be unreasonably withheld, delayed, or conditioned. Often, you are able to negotiate a “tenant improvement allowance,” which is an agreed-upon sum of money that the landlord will provide for the improvements and alterations you would like to make.
If you own an existing franchise and are looking for working capital financing, then you’ll likely have even more options than you had when you started your business. These loans can be used to fund any business activity, such as to make payroll or to make equipment purchases. The table below shows some of the best options for working capital franchise financing and who each might be a good fit for.
So think about how you can diversify your own business. Think about the risks you’re subject to, the technologies you’re dependent on, and how changes in the competitive landscape could blow you off course. Then come up with ways in which you can create multiple income streams, so that if one product or service is no longer popular, others can pick up the slack.
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.
Founder and Chairman of Palo Alto Software and bplans.com, on twitter as Timberry, blogging at timberry.bplans.com. His collected posts are at blog.timberry.com. Stanford MBA. Married 46 years, father of 5. Author of business plan software Business Plan Pro and www.liveplan.com and books including his latest, 'Lean Business Planning,' 2015, Motivational Press. Contents of that book are available for web browsing free at leanplan.com .
Accounts receivable financing. An accounts receivable line of credit is a credit facility secured by the company’s accounts receivable (AR). The AR line allows you to get cash immediately depending on the level of your accounts receivable, and the interest rate is variable. The AR line is paid down as the accounts receivable are paid by your customers.
Sometimes it makes sense to tap 401(k), Individual Retirement Account or other retirement funds rather than seek a loan. But rather than just taking an early withdrawal, which may be subject to taxation, you may want to consider setting up a C corporation that will own and operate the business. Then roll over money from your self-directed retirement account into that corporation’s profit-sharing plan and direct that those funds be invested into the franchised business. But this is a risky option: If the franchise fails, your retirement fund can be wiped out. Check with a professional on possible tax implications, and consider the tradeoffs carefully.
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.