Raising Funds For a Franchise Business

You love the idea of buying a franchise business. You already know the benefits of a franchise versus starting a business on your own. You might even have found the franchise opportunity that fits your personality and lifestyle perfectly but you do not have enough money to buy the franchise and fund it until it starts making a decent profit.

The banks have offered you a small commercial loan at excessive interest rates but it is not enough. They are refusing to lend you anymore funds. How do you go about raising more money to finance the purchase of the franchise business and also have some cash to pay the bills whilst in the launch phase?

If the equipment required to run the franchise business is expensive and makes up a large amount of the initial cost, you could look at leasing it or approaching special companies that offer plant and equipment finance. This is different from a bank overdraft and they have their own requirements for lending. Their interest rates are often much lower than overdraft rates and you can get loans over 3 to 5 years. With larger plant and equipment you could get the loan over 7 years and in special cases up to 10 years!

Plant and equipment finance can also assist in financing IT equipment like computers, routers and laptops. The rule of thumb is that if it is moveable, can be sold on to a third party and has some built in value, you can raise money from it.

You could look at taking more money out from your mortgage. This is classified as home refinance. If you have paid some of your mortgage off, the banks might look favorably at allowing you to increase your mortgage and take some funds out. The good thing about doing it this way is that you will benefit from lower interest rates than from an overdraft facility and you will have a longer term to pay the monies back.

If you have a retirement fund, you could use this to assist you in buying the franchise. Speak to your financial advisor and they can offer you advice on how you could treat the monies raised as an investment and the best way to fund your franchise purchase.

You could always approach friends and family to assist you. Just as with a bank, make sure that any agreement you reach is in writing and to make sure that the other side benefits, agree to pay them interest on the loan, perhaps 2% above base rate, or give them a small share in return for their investment. This might be the better route as then there is no loan to be repaid back.

Many franchisors have their own schemes for helping the right people buy their franchise. If you impress the franchisor enough, they could assist you and agree to let you pay the initial franchise fee in installments. Even if the franchisor cannot aid you, they might have a good relationship with a particular lender and if they push the right buttons on your behalf, this could help you in raising the funds required.

As you can see, there are many different options available to you for funding the purchase of your franchise business. Ask and you might receive.