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Have You Answered These 3 Essential Questions about Your Franchise Financing?

  • September 8, 2016

When franchisees are starting out, they can make the mistake of thinking that they need a certain set amount of financing to be set for life. After all, aren’t they simply capitalizing on the proven business model and good name of a franchise?

Not quite. Financing your franchise dreams is usually a nuanced undertaking. You need to know where you’re going to get the starting capital for franchise financing, but you also need to create a realistic business plan that reflects upcoming royalty fees, rent, and working capital.

franchise financing

Question #1: Where’s Your Franchise Financing Business Plan?

A franchise business plan is nice to have ready because it gives franchisors a good idea of where you’re headed and sends the right signals to private lenders.

In fact, although the primary source of starting capital for most franchisees is previous business experience or friends and family, you’ll probably need a business plan to secure a loan.

Franchised businesses, aside from giving you benefits like economies of scale and ongoing training from the outset, aren’t that different from other business ventures when it comes to business plans. Take heart, though, because franchisors will often help you create the narrative parts of your business plan and work with you to prepare the financial considerations that go into your disclosure document.

To sum it up, you’ll probably need a detailed business plan as part of the lending process and as a way of conveying that you’re a responsible, capable franchisee in your disclosure document. Your franchise business plan should also show that you understand the industry and competitive forces within it.

In addition, you want to indicate that you understand the responsibilities you’re taking on in operating a franchise location. Going over things like management, laying out your plans for marketing and advertising, and outlining financial projections can be a great way to show both franchisors and lenders that you’re serious about realizing your franchising dreams.

Question #2: What’s Your Budget and Net Worth Going into Franchising?

You might be surprised to hear this, but lenders could be just as interested in how you’ve budgeted in the past—irrespective of your net worth—and how you keep a personal balance sheet as they are in your ability to repay the loan. This boils down to liability.

Private lenders want to be reasonably certain that you’ll repay the loans that you take out. One way that they can determine this is by weighing your assets against your debts and liabilities, but another way is by checking how stable your previous job experience and financial history has been. That makes sense because both factors could affect your franchising financials.

Question #3: Can the Franchisor Help Where Loans and Private Wealth Stop?

A lot of franchisees assume that even though they’re capitalizing on a proven business model, they’re alone when it comes to attaining financial help from franchisors. You’ll be relieved to hear that Marble Slab offers positive, ambitious franchisees help along their franchising journey!

Franchisors frequently offer financial assistance to help defray initial startup costs as well as rent or equipment costs that can be burdensome for franchisees just starting out.

It’s not uncommon for franchisors to have setups with leasing companies to quickly and affordably get equipment out to franchisees. Since equipment expenses can form the majority of startup expenses for some franchisees that can be a huge help!

Ready to find out more about how you can finance your Marble Slab franchise? Then contact us today!

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