2. You can do it because there is a business appropriate for just about everyone’s interests, experience, passions or expertise. “Starting a business” really only comes down to figuring out your business idea, doing your paperwork, and sorting out the money. Given the number of funding resources available today, you shouldn’t have too much of a problem getting that initial startup cash, especially if you focus on a lean business model or MVP route to market.
Most franchisees will have to get a business loan at some point. Fortunately, compared to independent small business owners, franchisees have traditionally had an easier time securing financing from banks — including loans backed by the SBA (Small Business Administration). But bank loans and SBA loans are still not easy to get even for franchise businesses, and the application and approval process can be prohibitively long for a lot of franchisees in need of quick capital. Some franchisors offer their own financing programs, but the practice is far from widespread, so you can’t necessarily depend on funding from your franchise brand.
*Annual Percentage Rates (APR), loan term and monthly payments are estimated based on analysis of information provided by you, data provided by lenders, and publicly available information. All loan information is presented without warranty, and the estimated APR and other terms are not binding in any way. Lenders provide loans with a range of APRs depending on borrowers' credit and other factors. Keep in mind that only borrowers with excellent credit will qualify for the lowest rate available. Your actual APR will depend on factors like credit score, requested loan amount, loan term, and credit history. All loans are subject to credit review and approval.
In addition, the franchise industry is also experiencing a growth in companies dedicated to helping franchise owners secure financing. Two such firms are BoeFly (which matches borrowers to lenders online) and Franchise America Finance (who provides custom lending solutions for franchisees and works with franchisors such as The UPS Store, Popeyes, and Jersey Mike’s).
You can also use assets such as stocks, bonds, and mutual funds to secure a loan as long as they're not part of a qualified plan like an IRA profit-sharing plan. Also, if you are over age 59 and have a lot of money tied up in an IRA, you could use it for part of your financing requirements. Although you'll have to pay taxes on the amount used, not to mention suffer the loss of income from interest, it can be a good financing tool.
Companies sometimes think that patent protection is the only way to protect themselves. Technology startups frequently ignore the value of non-patent intellectual property. While patents can be incredibly valuable, it does not necessarily ensure that a company’s product is a good product or that it will sell well. Trade secrets, cybersecurity policies, trademarks, and copyrights can all be forms of IP that can be protected.
For most business experts and established entrepreneurs, buying an existing franchise through franchise loans presents a lot of advantages not present if you opt to start your business from scratch. Purchasing a franchise, especially a popular one, enables you to start with a large and solid client base, a crucial element during the initial stages of a business venture. Another obvious benefit is that building up the brand does not take much effort in contrast to promoting a new business name.
At ApplePie Capital, we are committed to fair lending. We make our commercial credit products and services available to all qualified applicants on a consistent and fair basis. ApplePie Capital does not condone or tolerate discrimination against any applicant on any prohibited basis under the Equal Credit Opportunity Act or any applicable state or local law. Fair lending principles are integrated into our corporate policies, lending operations, staff training, marketing efforts, and third-party lending relationships.
Use your retirement accounts (401(k) or IRA) to invest in your business without having to pay early withdrawal penalties or taxes. If you still need more money, this can be used in combination with a SBA loan. The investment into your business may be enough that no collateral is required. Even if collateral would normally be required, an alternative such as a payment reserve and be utilized. Learn more about 401K business financing.
Many new franchisees will need to find financing in order to fund the startup costs of their business. Franchise financing options can include ROBS, SBA loans, crowdfunding, home equity lines of credit, and even raising money from friends and family. We’ll cover these options in more detail, but first let’s take a look at the summary of each option in the table below.
“Not all businesses meet business loan eligibility requirements,” was Ali's initial comment on this topic. “Most banks have an income eligibility threshold of 1.25 times your expenses, including the repayment amount. [So] even if you do meet the requirements, think carefully before taking on the loan, and be sure you can service the repayment terms.”
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.
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.