Questions You Need To Ask About Franchise Financing
Investing in a franchise can be a great way to set yourself up for lasting success. However, it takes a lot of money to get started. Many people turn to franchise financing to help them secure the funding they need. This is a good option in many cases. However, it is not a universally beneficial direction. It is a good idea to ask yourself a few questions before you get started.
1) Do I Need Financing?
Do you have savings you could use to help with financing? Are there friends or family members who may be willing to work with you? Could you invite a partner to join your franchise who could add funds? It is a good idea to know your options before you commit to financing.
2) How Is My Credit?
You will often need a good credit profile to borrow for your franchise. Plus, having good credit will help you to secure the best terms. If your credit is not great, consider shoring it up before you start applying for a franchise loan.
3) Can I Go to the Franchisor?
In many cases, the franchisor will offer first-party financing options. This can be a good way to pay for your franchise. However, it is not always the best option. Nonetheless, it is a good idea to determine if this is on the table before you approach a third-party lender.
4) How Much Will This Cost?
Before you take on any loan, you should know how much it is going to cost you. Think about how much it will take out of your monthly cash flow to pay it back. Also, consider how long you expect to need to go before the business’s profits will cover the loan. Finally, make sure you know what will happen if the franchise struggles. Will you be personally on the line?
5) Could Financing Give Me Freedom?
Some of the other options for getting funding include taking on an investor. However, this means that you are beholden to the desires of that investor. Conversely, a lender will mostly be interested in you paying back the loan. In many cases, this can be a significantly freer arrangement for you.
Discover more about franchise financing and the options available to you. It could help you make the right choice for your new franchise business’s funding needs. The more you learn, the better off you will be.