Finance your Franchise Before Rates Rise

Okay, we are got to a point we all knew would come. The Fed is going to start raising the interest rates that companies and banks borrow at, which will flow down to SBA, Conventional and Home Equity loans. If you plan to finance your franchise start-up, the time to start taking action is now. Franchises are growing at a record pace.

The good news is that rates won’t jump too high all at once, so you have time to target franchises that fit your skills, likes, goals and how you want to work. There is time for you to do proper investigations of those companies to make sure all the pieces fit and that they have a good model, training and support.

The reason to kick it into gear is simple, the best use of your funds. Does it make more sense to spend more money monthly on marketing, staff and things that grow your business or would you rather be spending it on interest for your loan?

Once you have identified a brand, or brands, that look good to you then you will want to give thought to your financial strategy. You could go directly to your local bank and apply for a Small Business Administration (SBA) backed loan. They may approve you if all goes well.

Here is the challenge, and nothing against that local bank, but what happens if the type of business you want to be in is not one that the people who approve the loans at the corporate office for that bank like to approve?  Your local bank manager may not know that, or wants to “give it a try”.

When your local bank turns down the application that you spent weeks working on with them then your first inclination would be to go start the process all over at another local bank.  Weeks later you might get approved or not.

Here is how countless new franchise owners speed that process up, ensure a higher likelihood of approval and make the whole experience easier.

There are a number of franchise financing brokers that specialize in this space, they know lenders all across the country that like franchise loans. They have fine tuned the application process and know just how to package that loan application up to get the best review. The best part of all may be that they have built relationships with the banks and often know which banks like each different franchise brand or model.

When you work with an experienced franchise loan broker, they work with you to create one very best application package for you. Then they send that one package to a handful of banks that like your type of business.  There is no preparing one package, for one bank, at a time. Then the broker leverages their relationships on your behalf to guide that application through the process at the bank.

Companies like FranFund, Benetrends and Guidant Financial are some that come to mind. All have long track records in helping franchise candidates get funded. If you need an introduction to any of them send me a note and I will make that intro.

Loan brokers often have a buffet of services from financing to other resources for business owners. In addition to SBA loans they can often help with conventional and unsecured loans.

One of the most often overlooked funding options by new business owners is called a ROBS program. This is a program where you may be able to utilize your existing 401K funds tax and penalty free (work with the funding group and your accountant on this) to start your business. This is a debt free way to fund your business with pre tax money. You may find that it gives you added peace of mind and a faster path to positive cash flow in your new business.

*speak to a qualified professional before emptying your 401K

Since you already invest those funds in businesses you don’t operate, run by CEO’s you have never met, it always made sense to me to move those funds to your business and control your own destiny.

However you choose to fund your business, now is a good time to start that process. In the past year and a half there have been a record breaking number of new business registrations. You could be next, the beginning of your family empire.

Your apprenticeship in the corporate world may be over. Now may be your time.

If you perfect business was out there, and the funding was available, and you could validate with existing owners that this business was great and the franchisor would train and support you well… What would stop you?

What will your success story be? Let’s go find it!

George Knauf is a highly sought after, trusted advisor to many companies; Public, Independent and Franchised, of all sizes and in many markets. His 20 plus years of experience in both start-up and mature business operations makes him uniquely qualified to advise individuals that have dreamed of going into business for themselves in order to gain more control, independence, time flexibility and to be able to earn in proportion to their real contribution.

Contact the Franchising USA Expert George’s Hotline 703-424-2980.