By Joel Libava
If you’re exploring some ideas for a franchise business, or you’ve landed on one you like, getting a loan for a portion of the total investment is undoubtedly on your list of things to do.
It may not be easy to get a loan for a start-up franchise, currently, but if you remain open, and stick to it, you should be able to find a way to become your own boss. There are a number of ways to obtain financing for your own business.
From the simplest ways such as home equity loans/lines, to a little more complicated financing arrangements that involve the Small Business Administration (SBA), the best way to find out which type may be right for you, is to talk to someone who knows what’s going on, currently.
I recommend contacting your local (SBDC) Small Business Development Center, first. Look up your local SBDC office, here. They can help you with your business plan, and also introduce you to local lenders and other financial resources. (Local lenders tend to be more willing to look at entrepreneurial ventures that will be located in their own backyard.)
The credit challenges of the past couple years have increased the need for more creative types of financing arrangements, such as using a portion of your retirement money to help fund your franchise.
A lot more people than you may realize have opened their shiny new franchise businesses in this way.
Using your 401(K) or IRA to start your business isn’t without controversy. (Or risk.) Read about just how risky using your retirement money may be, in the not so distant franchise future.
Earlier this year, there was an interesting story over at The Wall Street Journal. In it, a new kind of lender was discussed; a “specialty” lender. These lenders are very focused on certain industries. These industries are ones that they have lots of knowledge about.
From WSJ Online: “Loan officers at specialty banks often have a sharp eye for mismanagement and are judicious about loans they issue. That selectivity is a necessity, as regulators often scrutinize banks that carry too much weight in one or two industries.” Read more at The Wall Street Journal
I’m not sure if any lenders will appear that specialize in certain franchise business niches, but maybe there’s an opening for some forward-thinking entrepreneurs who know financing.
If none of these options work in your quest for franchise financing, don’t give up too fast. It’s not unusual to get turned down the first or even second time, during tough times like these in the credit markets.
The Franchise King®, Joel Libava, is president of Franchise Selection Specialists Inc. Joel provides franchise advisory services to those interested in exploring franchise ownership, by showing them how to properly select and carefully research franchise opportunities. He’s frequently called on by the media for his no-spin insights on the world of franchising. You can follow Joel on his award winning blog-The Franchise King Blog