5 things you need to know about financing a franchise: accessing money is easier if you plan ahead.

Author:Tablas, Marietta
Position:Small Biz

MONEY TO BUY A FRANCHISE ISN'T always easy to come by but it is accessible if you adopt the right approach. Sources of financing include traditional commercial banks, business finance companies such as GE Franchise Finance, Small Business Administration-backed loans, crowd funding, and equity or angel investors. When considering various finance options, first take personal inventory of your resources, advises Kevin Hicks, a partner with Blackman and Associates, a franchise consulting firm with offices in New York City and Atlanta, which provides franchise advisory and acquisition services for individuals and companies. Blackman and Associates identifies viable and lucrative franchise opportunities for its clients, for both startup and existing businesses. Hicks, who has also been a multiple unit owner of several food franchise concepts, offers several do's and don'ts to better position yourself to secure financing.

  1. Examine your credit and start a savings plan. Your credit report will be an important consideration in the financing decision. It speaks to your history of paying back monies that you have borrowed previously. You should order your credit report six months to a year before seeking financing, Hicks recommends. Check for errors. Also, assess your outstanding debt and pay it down. You should also begin to cut your expenses six months to a year before seeking financing. Reducing your expenses will allow you to save more money toward your franchise investment. It also will help you to live below your means to compensate for the likely drop in your income during the initial years of operation.


  2. Be careful not to underestimate or overestimate your capital needs. One of the primary reasons many small businesses fail is the lack of proper capitalization. You should know your exact capital needs, Hicks says...

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