Franchising is the easiest way of becoming your own boss compared to establishing a new company. When franchising a business, a newbie thinks about the required investment. But the main question is: How to finance a franchise with no money.
How to finance a franchise with no money?
Buying a franchise is less expensive as compared to starting a new business from a scratch, still initial capital is needed to execute the plan. Financing a franchise with no or little money can be challenging, but not impossible. To work it out, you need to have a concrete business plan to understand how much capital will be enough to make the franchise stand on its own. It is always advisable to have an accurate picture of the business so that the reality is not misleading.
Every business needs money and it is next to impossible to start any business with no capital. But there are certain sources which can lend you money on credit, so once the business starts generating profits, you can pay back.
The founder of Subway Franchise, Fred Deluca, has claimed that he started his first outlet with literally no money. He was given relaxation by his suppliers to pay them after 30 days and attain the supplies on credit. So, his restaurant was operational from the very first day.
He advises the younger people on how to finance a franchise with no money.
How to find capital for a franchise?
Financing can be arranged through a bank. It depends what the new entrepreneur wants. Sometimes the franchiser is the source of capital. He wants to franchise his business according to his terms. At times, he wants to use a franchisee’s services and lends him the franchise in return of his services.
A second option can be of approaching friends or family to get finances. This is a very common way of generating capital without involving any terms and conditions. Sometimes the friends or relatives can also help in signing a guarantee for the bank. On their guarantee, a bank may release you funds for your venture.
Lenders can finance your business but the conditions are always stricter. There is a whole down payment criteria involved, usually with some interest percentage as well.
There are Kickstarter firms that can help you in raising money from the general public for your business venture.
There are economic departments in different locations which have programs solely dedicated for directly lending the capital to the aspiring businessmen.
The initial plan of a franchise
Many franchises tend to offer a scheduled investment program for the franchisee to invest in. The initial elements which require a capital in the initial phase are:
- The fee for the franchise. This solely depends upon the franchiser. How much he plans to attain for his business.
- Equipment can be part of a franchise investment, though this might not be mandatory in every business franchise.
- Working capital that includes additional funds to start a franchise.
The majority of the capital does not go to the franchiser, rather it is used to initialize the business venture.
Small business Administration (SBA) is usually the answer to the question how to finance a franchise with no money.
SBA makes life easier by granting aspirant franchisee business loans on competitive terms and interest rates. Though the repayment terms are tough, and you are bound to comply with them, it does give you immediate capital on very low interest rates. The SBA doesn’t give out loans itself; rather it provides guarantees on loans given to banks, unions, and even other private lenders who all work under the umbrella of intermediaries.
Even though one of the quickest ways to become an entrepreneur is through buying a franchise, initially some capital is required to attain the ownership of the franchise. There are affordable ways you can opt for, an in-depth research is required before executing the plan so that the business can flourish over a long period of time, and proves to be fruitful.