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.
The Small Business Administration (SBA) is committed to helping small business owners get the funding they need to successfully start and run their business. The SBA is not a direct lender but rather sets guidelines for loans made by their partners. The SBA guarantees loans for select businesses, meaning they agree to pay the loan off if the owner defaults, which makes it easier for entrepreneurs to get funding.
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.
As you have done throughout the planning and startup process, consider analyzing your competitors and other companies. How are they selling themselves? How do they portray themselves? What do they say makes them unique? If you’re not sure, take a look at their advertising and marketing messages. This is generally where you’ll find the USP or variations of it.
Borrowers have multiple options for SBA-backed loans, including microloans with a six-year repayment term to allow new businesses to borrow up to $50,000; 7(a) loans that allow companies to borrow up to $5 million; and 504 loans, available for up to $5.5 million for smaller businesses with a net income under $5 million and a net worth below $15 million.
Patents. Patents are the best protection you can get for a new product. A patent gives its inventor the right to prevent others from making, using, or selling the patented subject matter described in the patent’s claims. The key issues in determining whether you can get a patent are: (1) Only the concrete embodiment of an idea, formula, or product is patentable; (2) the invention must be new or novel; (3) the invention must not have been patented or described in a printed publication previously; and (4) the invention must have some useful purpose. In the United States you obtain a patent from the U.S. Patent and Trademark Office, but this process can take several years and be complicated. You typically need a patent lawyer to draw up the patent application for you. The downside of patents is that they can be expensive to obtain and take several years,
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.
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:
There are many financing options for your franchise, but making the right choice is critical to your success. ApplePie understands the complexity and time constraints that you face in securing capital. That's why we’ve created a transformative lending network to suit your financial needs, maximizing flexibility and reducing the headaches and inefficiency of working separately across individual lenders.
Dave Crenshaw is the master of building productive leaders. He has appeared in Time magazine, USA Today, Fast Company, and the BBC News. His courses on LinkedIn Learning have received millions of views. He has written four books and counting, including The Myth of Multitasking: How "Doing It All" Gets Nothing Done, which was published in six languages and is a time management bestseller. As an author, speaker, and online instructor, Dave has transformed hundreds of thousands of business leaders worldwide. Find out more at DaveCrenshaw.com.
The ROBS option allows you to use funds from your retirement savings to finance your franchise without paying early withdrawal penalties and taxes. This can be an attractive option for franchisees that struggle to get traditional loans and are comfortable with some amount of risk. Those with substantial retirement savings may feel most sanguine removing a portion of those funds for this purpose.
You should approach small-business-loan shopping just as you would shopping for a car, says Suzanne Darden, a business consultant at the Alabama Small Business Development Center. Once you determine which type of lender and financing vehicle are right for you, compare two or three similar options based on annual percentage rate (total borrowing cost) and terms. Of the loans you qualify for, choose the one with the lowest APR, as long as you are able to handle the loan’s regular payments.