Franchises are worth considering because opening a business can be risky, especially if you don’t have prior experience juggling all the things that come with it. You’ll need to choose a name and image for your brand, make sure you have the right staff and build a full suite of products or services to meet demand. Even if you have mentors or a network of friends who are small business owners, you’ll often find that you’re struggling with important decisions.
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.
An investor looks for a more high-risk opportunity to get a higher reward and will put their money in established businesses that have the potential for high growth. Investors generally expect to be involved in the business in the form of a seat on the board of directors or some other role in which they have a say in how the business is managed. For the most part, investors want to get in on a company while it is in its early growth stage, and they get out once the business has reached a certain level of growth.
Franchise fee: Most companies charge an upfront fee to start a franchise, paid in a lump sum or installments. The amount varies by company, but it’s typically tens of thousands of dollars and usually is not refundable once a franchisee is accepted. For example, Jamba Juice charges $25,000 per store, and Hilton Worldwide charges $75,000 to start a 150-room Hilton Garden Inn.
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.
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.
More than anything, focus on consistent, repetitive branding. Many marketing professionals believe in the “rule of seven," which means people need to hear or see your message at least seven times before taking any action. In today’s world of constant connectivity, you must make sure you’re seen and heard. The most common reason that people do not buy your product is that they do not know about it yet.
Shannon is a writer and editor based in San Diego, CA. Shannon attended San Diego State University, graduating in 2005 with a BA in English. She is the former editor-in-chief of SteelOrbis, an online trade publication. Shannon has also published articles for LIVESTRONG.COM, eHow, Life'd, and other websites. She has been with Merchant Maverick since 2015, writing about POS software, small business loans, and financing for women entrepreneurs.
In Canada, you can get a free credit report by contacting one of the two credit reporting agencies, TransUnion or EquiFax Canada. To receive your free credit report you will need to mail or fax one of these companies a request along with copies of two pieces of I.D. Note that you will not be able to get a free credit report through the website of either company; you will be charged a fee for an online report. CreditKarma provides free online credit reports through much of Canada.
Oral agreements often lead to misunderstandings. If you plan to hire a prospective employee, use a carefully drafted offer letter, which the employee should be encouraged to review carefully before signing. For senior executives, a more detailed employment agreement often makes sense. A good offer letter or employment agreement will address the following key items:

- Let's talk a little bit about the future. At some point your business is going to near the final stages of being a small business and start to evolve into a medium, or even a large-sized business. The question is: who is going to lead this business at that point? Before we talked about the org chart and the difference between the founder and the president. Odds are, you have been filling both roles. The founder is the visionary, and the president is the person who makes the business run. But, when it comes time to transition into that medium-sized business, really it's time for you exit one or both of these positions. Why is that? Well, you have learned certain skills that have helped you succeed as a small business owner, but, a different set of skills is required for a large or medium-sized business, and there are people out there who have those skills. They have that expertise, and it's much better to hire someone else, rather than you put this burden on yourself. I've often seen…
Working capital loans. A working capital loan is a debt borrowing vehicle used by the company to finance its daily operations. Companies use such loans to manage fluctuations in revenues and expenses due to seasonality or other circumstances in their business. Some working capital loans are unsecured, but companies that have little or no credit history will have to pledge collateral for the loan or provide a personal guarantee. Working capital loans tend to be short-term loans of 30 days to 1 year. Such loans typically vary from $5,000 to $100,000 for small businesses.
Broadly, there are two types of loans: secured and unsecured. There are dozens of types of loans depending on their nature, purpose, applicability, loan amount, interest and terms but they can all be classified as either secured or unsecured. Secured loans require collateral. It is a tangible asset that acts as the security. Unsecured loans don’t need such collateral or any security.

The brand you choose to work with may provide upfront estimates of how much it will cost to start a new business and can also give you information on monthly and year-over-year revenue goals and expected progress. This information, if available, is often found in Item 19 of the FDD. However, a franchise is not required to provide this information in their FDD - so speaking with several existing franchisees is always a wise choice. Based on this data and your own projections make sure you understand when your business will break even factoring in both expenses as well as the loan payments and always assume there will be unexpected costs. When determining your loan amount make sure to include working capital to get you through the ramp-up period of the business until the business can support expenses and loan payments. When lenders review your loan application they will pay attention to several key things, but 2 items that you should be aware of are Loan To Value (LTV) and Debt Service Coverage Ratio (DSCR). LTV is a measure of the total value of the loan amount compared to the collateral pledged. Lenders will look at the collateral as a secondary source of repayment of the loan and in many cases with a start-up financing may look for collateral to cover the full loan. In cases where there is not enough collateral the lenders will look to other strengths of the deal. DSCR is a measure of the cash generated by the business available for the loan payments. The higher the DSCR, the better because in the bank's view there will be a cushion of cash just in case there are unforeseen problems or slow periods for the business. A lender will typically look for a minimum DSCR 1.20x or more. If your projections don't show the ability to service debt lenders may shy away from your loan request so it is important to understand the accuracy of your projections.

SBA small business loans. Some banks offer attractive low-interest-rate loans for small businesses, backed and guaranteed by the U.S. Small Business Administration (SBA). Because of the SBA guarantee, the interest rate and repayment terms are more favorable than most loans. Loan amounts range from $30,000 to as high as $5 million. However, the loan process is time consuming with strict requirements for eligible small businesses. Visit the SBA website to see a list of the 100 most active SBA lenders.
The brand you choose to work with may provide upfront estimates of how much it will cost to start a new business and can also give you information on monthly and year-over-year revenue goals and expected progress. This information, if available, is often found in Item 19 of the FDD. However, a franchise is not required to provide this information in their FDD - so speaking with several existing franchisees is always a wise choice. Based on this data and your own projections make sure you understand when your business will break even factoring in both expenses as well as the loan payments and always assume there will be unexpected costs. When determining your loan amount make sure to include working capital to get you through the ramp-up period of the business until the business can support expenses and loan payments. When lenders review your loan application they will pay attention to several key things, but 2 items that you should be aware of are Loan To Value (LTV) and Debt Service Coverage Ratio (DSCR). LTV is a measure of the total value of the loan amount compared to the collateral pledged. Lenders will look at the collateral as a secondary source of repayment of the loan and in many cases with a start-up financing may look for collateral to cover the full loan. In cases where there is not enough collateral the lenders will look to other strengths of the deal. DSCR is a measure of the cash generated by the business available for the loan payments. The higher the DSCR, the better because in the bank's view there will be a cushion of cash just in case there are unforeseen problems or slow periods for the business. A lender will typically look for a minimum DSCR 1.20x or more. If your projections don't show the ability to service debt lenders may shy away from your loan request so it is important to understand the accuracy of your projections.
Small business owners are passionate about their ideas and tend to get excited about the little details, leaving the financials alone in the back of their business plan. It’s a mistake to put your financial information as an appendix or otherwise in the back because “it says that finance is not important,” advises Shelton. Your lender wants to feel comfortable that you have a plan for managing your finances, including paying back your loan, so keep your financial information up front in your business plan.
Keep in mind that whenever you’re applying for a business loan, whether it’s for start-up costs, working capital, or real estate, it’s a good idea to complete more than one loan application so you can compare rates and terms. Most lenders will only do a “soft” pull on your credit in the pre-qualification stage and will not do a hard pull (the kind that dings your credit score) unless you accept the loan offer.
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.
Using a stock loan (securities-based financing) allows a potential franchisee to leverage the value of their stocks without giving up ownership of the stocks. Securities based financing allows potential small business owners to get fast, affordable funding, while also having the ability to keep all the upside of keeping their stocks (dividends and stock price growth). Funding usually comes in the form of a line of credit backed by the stocks’ value.
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.
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.
For the limited time beginning with applications dated July 9, 2018, and ending with applications dated on or before December 31, 2018, the interest rate on cash advances and purchases made on your Business Advantage Credit Line account approved for not less than $10,000 and not more than $100,000 is a fixed introductory interest rate of 2.99% for the first 12 billing cycles from the date your Credit Line account is opened. After that, the interest rate will be a market competitive variable interest rate, based on the Prime Rate, your creditworthiness, your business relationship with Bank of America, and the approved amount for your Credit Line account. Excludes secured loans and secured lines of credit, and unsecured term loans. Origination fee of $150. Annual fee of $150 is waived for the first year of your Credit Line account, and assessed annually thereafter. Enroll in Autopay to make payments on your Credit Line account within 90 days from date it is opened and get a $50 credit to your Credit Line account. The $50 credit will be applied to the account after the origination fee is posted. Other restrictions may apply. Subject to credit approval.
We love this lender for their sterling reputation, excellent customer support, and reasonable terms and rates. But again, you’ll need to already have an established franchise to qualify, as well as good credit. This loan also takes longer to apply for (and receive) compared to most other online franchise loans, and it can potentially take a couple months for the money to come through. You’ll need to submit all the documentation you’d need to get a traditional SBA loan, and it will be helpful if your franchise is already listed in the SBA Franchise Directory. Even though there are a few more hoops to jump through than with other alternative lenders, SmartBiz is still one of the quickest ways for a franchisee to get an SBA loan.
ApplePie Capital can offer loans for borrowers that need financing in between an SBA loan and other expensive alternative loans. You must borrow a minimum of $15K to finance specific equipment, or at least $100K for any other needs. The interest varies depending on a number of factors, and Apple Pie Capital charges a one time 4.5% origination fee on all of their loans.

In a misguided effort to save on expenses, startup businesses often hire inexperienced legal counsel. Rather than spending the money necessary to hire competent legal counsel, founders will often hire lawyers who are friends, relatives, or others who offer large fee discounts. In doing so, the founders deny themselves the advice of experienced legal counsel who could potentially help them avoid many serious legal problems.
More Franchise Loans, More Franchise Launches, More Franchise Revenue. In today's economy many top franchises face a significant challenge: access to funding. With ample interest from entrepreneurs ready to open new locations or expand existing ones, the difficulty of accessing capital significantly slows the execution of opening such franchises, costing both the franchisee and franchisor time and money.
It’s often easier to get started with a franchise compared to an independent business because a franchise comes with a proven concept, brand recognition, and customer base. Although the success rates of individual franchises vary widely, as a whole, franchises perform better than independent businesses in the long run. According to a report by the International Franchise Association, about 12,000 franchises open their doors every year!
On the other hand, food trucks and vending machines are trends helping to mold the industry even though they are not new concepts. The consumer desire and such convenience have become overwhelming, thus inspiring a more innovative variety of food trucks and vending machines. Their market typically consists of business parks and buildings, transit areas, tourists spots, sporting, cultural, and other entertainment events, and tertiary education institutions. Thus, for example, the vending machine company named the Burrito Box, makes all their food off-site and franchises refill the contents daily. With this approach, consumers get the same quality of food that they would get out of fast-casual restaurants. As follows, the capital it would take to start up a company of this sort ranges from $50,000 to $250,000, but it all depends on how equipped the truck comes. Its also important to mention that since consumers have demanded more artisanal products, food businesses are investing in fresh and healthier ingredients and options. Which can be seen already with specialty sandwiches, locally sourced products, vending machines with healthier snacks, build your own concepts (assembly line formats, similar to Chipotle), and upscale versions of the basics. Either way, this model is becoming more popular, lucrative and assessable to entrepreneurs of all kinds.

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.


Type of loan. Many types of business loans need to be secured by collateral, whether that’s by your mortgage, investment accounts, vehicle, life insurance or other assets. You may find that while you still need to secure them, SBA loans come with better interest rates and requirements that aren’t as strict as other financing options. The fact that they’re guaranteed for up to 90% of their amount by the government gives lenders the confidence they need to make offers to customers who may be more risky borrowers.
The staff at Key Commercial Capital was wonderful. They made sure to explain all our options in detail and were always interested in the best for us. They verified our documents before submitting for approval to ensure everything was in order and that the application and closing process was as smooth as possible. They were also very responsive and available at all times. I will certainly be back on the next opportunity.

These Small Business Workshops are being offered solely as a courtesy to TD Bank Customers. The information is supplied on an "as is" basis and should be used at your own risk. Neither TD Bank nor the authors or providers of the content of the workshops make any representation or guarantee as to the accuracy and/or reliability of such content nor shall any of the foregoing parties or their employees be liable for any loss or damages suffered as a result of any use of such content.
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.
SCORE.org conducted research in 2015 that studied business growth in the United States between 1997 and 2014. They found a 67.8 percent increase in the number of women-owned businesses, compared with a 34.4 percent increase in men-owned businesses. The study also found a huge growth in the number of businesses run by women of color, up an incredible 215.7 percent, with revenues increasing by 193 percent. Latino-run small businesses also saw a massive increase, with small business ownership growing at a rate of double the national average.
You do need to create a list of prospects before you reach out. This will help you focus on targeting the right areas and the right people. Do your research. If you’re selling a high-end product, you don’t want to target/cold-call customers in a low-income neighborhood. And, if you’re selling a product suited to children, should you really focus on the section of town that all the college students live in?

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.
The purpose of these checks is to make sure that the applicant will fit into the company’s culture and to ensure that they have been truthful and accurate in their resume and employment application. However, the process is carefully regulated by the federal government (through the Fair Credit Reporting Act) and the laws of many states; failure to follow the highly technical process can lead to class action lawsuits. Consider consulting legal counsel and, for general information, see the EEOC’s Background Checks: What Employers Need to Know.
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.

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.

By the end of this lesson, you will be able to manage all of your downloaded banking transactions. You will also understand how to enter basic banking transactions manually. Finally, you will be able to use the reconcile tool to ensure that the transactions on your bank statement match up with what has been entered into QuickBooks. This will result in up-to-date financial statements.
Some franchisors report being approached by financial brokers--historically more interested in big deals--to put together large pools of money using SBA and private funds. These funds would be available to franchisees through the franchisors like a trust fund. Groups of smaller banks with funds to invest would contribute to the fund from all over the country.
If your DSCR is less than one, you have negative cash flow because company income isn't enough to repay debt. Getting a loan will be difficult. Typically, lenders want to see at least a 1.35 DSCR, which would mean that if your organization's annual net operating income is $70,000, you wouldn't want to borrow more than around $51,800. However, the higher your DSCR, the better your chances of being approved for a loan on favorable terms. 
If you start your company with co-founders, you should agree early on about the details of your business relationship. Not doing so can potentially cause significant legal problems down the road (a good example of this is the infamous Zuckerberg/Winklevoss Facebook litigation). In a way, think of the founder agreement as a form of “pre-nuptial agreement.” Here are the key deal terms your written founder agreement needs to address:
In case of microloans or loan guarantee program which is the 7a term loans, we can show how you can get approved to get a small business loan without collateral. Unsecured business loans are rare but possible through the SBA. In case of disaster recovery loans, the damaged property or asset will be used as collateral. In fixed asset loans backed by the SBA, the procurement itself is a form of security considered by the lenders.
You’re applying for a business loan, and you may even be organized as a corporation or LLC. However, lenders will almost always want to hold you personally responsible for the loan. If they don’t do that and the business fails, there’s nobody left to repay them. But if you make a personal guarantee on the loan (which is likely a requirement), they can go after you personally, and your personal credit will suffer if you don’t repay.
Consider using a tenant broker. A good tenant broker can be invaluable and will represent your company’s best interests. He or she will educate you on the current market; locate spaces that meet your stated parameters; arrange tours and accompany you to view these available spaces; and then prepare offer letters and negotiate with landlords for all spaces that work best for your company.
*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.
Personal collateral requirements depend on the loan amount and the project. Does the coffee franchise involve commercial real estate or will the business be leasing a space? Collateral can be in different forms. Real estate equity is one form of collateral. Cash (in the form of a payment reserve or a CD) is another. We would need to know the specific project cost breakdown to know what might be possible. Rule of thumb would be to plan on 25% personal equity into the business and the bank will finance 75%. If it is preferred to avoid putting a lien on personal real estate, plan to have 18 months of loan payments to set aside in an escrow account at the bank as a payment reserve. The payment reserve can be released back to you after 2 years, as long as the business is showing good cash flow and making the loan payments without a problem. The other option is a CD held at the bank for the term of the loan. The CD is usually a smaller amount of funds than the payment reserve but is held for the entire term of the loan.
3. Leverage social media. Let’s face it, everyone is on social media these days, and the majority of traffic still occurs on Facebook. If you are not using Facebook for your business, create a page today. You are leaving an opportunity on the table if you don’t. There has been a shift the past few years with more and more retirees joining the social media world. I guess they realize that if they want to keep up with their kids, grandkids, friends and neighbors, they better get with the program. In fact, retirees are often my best brand ambassadors and help promote our events.
It’s useful to come up with a business plan to think through what you want to do for the development of the product or service, marketing, financial projections, and more. And you should then get input from trusted business and finance advisors. But don’t go overboard with a 50-page business plan. In reality, many startups have to deviate from their plan as the business develops.
Instead of spending hours playing with accounting software, dreaming up potential expense and income categories, and creating fancy reports with no data, spend that time generating revenue. As long as you record everything you do now, creating a more formal system later will be fairly easy. It will also be more fun, because then you'll have real data to enter.
The strength of your personal credit score has a direct correlation to the amount you are looking to borrow. The greater the amount, the more important the score will affect the decision by the lender. Because what does the credit score indicate? It shows the ability to keep an individuals finances tidy. There are extenuating circumstances, like health challenges or horrific student loan stories and some lenders may be willing to consider your personal credit challenges if you are up front and have all your documentation available backing up your story.

Richard D. Harroch is a Managing Director and Global Head of M&A at VantagePoint Capital Partners, a large venture capital fund in the San Francisco area. His focus is on Internet, digital media, and software companies, and he was the founder of several Internet companies. His articles have appeared online in Forbes, Fortune, MSN, Yahoo, FoxBusiness, and AllBusiness.com. Richard is the author of several books on startups and, co-author of Poker for Dummies and Mergers and Acquisitions of Privately Held Companies (Bloomberg), and a Wall Street Journal-bestselling book on small business. He was also a corporate and M&A partner at the law firm of Orrick, Herrington & Sutcliffe, with experience in startups, mergers and acquisitions, and venture capital. He has been involved in over 200 M&A transactions and 250 startup financings. He can be reached through LinkedIn.
Plum Alley was founded by Deborah Jackson, who had over two decades of experience raising capital for businesses, in 2012 as a crowdfunding platform for women-run businesses that needed extra funding. In 2015, Plum Alley Investors emerged as a way to connect women-owned businesses with investors who want to invest specifically in women-run businesses. Plum Alley is unique in that their investors are dedicated to investing in women-centric businesses, and they help women gain access to the capital they need.
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.
Microlenders are nonprofits that typically lend short-term loans of less than $35,000. The APR on these loans is typically higher than that of bank loans. The application may require a detailed business plan and financial statements, as well as a description of what the loan will be used for, making it a lengthy process. Also, the size of the loans is, by definition, “micro.” But these loans may work well for smaller companies or startups that can’t qualify for traditional bank loans, due to a limited operating history, poor personal credit or a lack of collateral.
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