Understanding how to fund a franchise business is critical because it could ultimately determine what business you end up purchasing.
As a franchise adviser, the most-asked question I receive after “What’s the best franchise to buy?” is “Where can I get the money” to purchase a franchise. Understanding how to fund a franchise business is critical because it could ultimately determine what business you end up purchasing.
In addition, potential franchisees often find out that there are more options than they thought, and they may be able to purchase a larger territory, multiple territories, or a resale business.
Understanding your funding options isn’t just for the purpose of starting up your franchise. It’s also about cash infusion opportunities down the line when you want to grow the business or have an unplanned event occur that requires emergency funds.
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There are new programs coming out all the time that investors can take advantage of, and it’s important to learn about those, as well as the changes that occur to existing programs. I sat down with Rodney H. Brown, executive director of Unlimited Financial Funding L.L.C. as he shared some valuable information.
How to Fund a Franchise
What are the most common loans you broker for your clients?
What does a client seeking funding need to qualify?
Industry experience is not required, however, with hotels most lenders prefer two or more years’ experience or have a management team in place with the experience.
What are some of the franchise brands you have funded for clients? Marcos Pizza, Five Guys, Subway, and Tropical Smoothie Café.
What advice do you give clients on how much they should borrow?
Other than SBA, what funding options are there?
We can provide additional working capital and term loans — conventional loans for those clients that prefer not to take an SBA loan, and we also can assist our clients with programs to calculate any new or existing federal tax benefits and incentives they may not be taking advantage of. We are always trying to add more value for clients to stay ahead, and with limited business debt as possible.
When should a candidate start the funding process and how long does it take?
Are there limits to what the funds can be used for?
They can be used for business acquisitions, partner buyouts, buying commercial real estate for owner-occupied properties (the borrower must occupy 51% of total space), working capital, commercial build-out, as well as buying equipment & FF&E (furniture, fixtures, and equipment).
What other key information do potential candidates need to know?
So, if you’re denied a loan for no collateral, that shouldn’t mark the end of your journey. Unlimited Financial Funding works with several non-bank lenders that do not require collateral. However, if you do have a home or other investment properties the lender may have to use that as collateral.
The best funding partners focus on SBA loans ONLY, no bank deposits or bank accounts, simply financing and closing viable loans for the small business community.
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Source: Black Enterprise