Do have your heart set on purchasing a franchise, but don’t have the capital to invest? Although the entrepreneurial spirit alone won’t cover the costs of purchasing a franchise, it is possible to attain the funds required. There are several options available for financial assistance.
If you are wondering how to buy a franchise with no money, consider the franchise financing options outlined below.
franchise startup costs
To obtain the right to use a franchise’s trademark, promotional materials, training strategies and operational systems, you must pay a franchise fee. This cost should be added to the usual business startup costs, which may include:
- Insurance and permit fees
- Employee expenses
- Technology expenses
Make sure you have a solid understanding of the costs involved so you can acquire the necessary funds.
how to get the funds to cover startup expenses
Here are some of the avenues you can pursue in order to get the money you need to open a franchise.
1. franchisor assistance
The first place to explore financing is with the franchisor. At the very least, they may already have a trusted lender they partner with to help potential franchisees. Some franchisors offer debt financing themselves, which will cover either a portion of, or all of, the costs involved. This may include leasing equipment. Other franchisors offer incentives for certain groups of people, so check to see if you qualify for any discounts or specialized financial assistance they afford to potential franchisees.
2. bank loans
If you have good credit, the possibility of accessing a franchise loan from a bank or credit union is strong. You can increase your chances for approval if you can verify that you are investing in a franchise that has a proven, successful business model. With that in mind, it’s important to ensure that you find and choose to work for a franchisor that has a history of success.
3. sba loans
This is a government loan program created for individuals who want to purchase a new business. Some would argue that this is a more likely option in comparison to a conventional bank loan. To qualify, you most meet the following requirements:
- FICO score of 680 or higher;
- Ability to put a pre-determined percentage down on the loan;
- A written business plan;
- Three years of tax returns;
- Collateral (although this is not always mandatory).
Because most franchises are registered with the SBA, your chances for approval are increased. Your franchisor may also already have a relationship with an approved SBA lender.
You can choose to leverage the collateral in your 401(k), and even pay yourself a salary while the business gets up and running, without facing penalties. This is especially beneficial if your livelihood depends on a steady income. Another benefit is the ability to choose the exact amount of capital you want to leverage. Taking out a sizeable loan to purchase a franchise can be intimidating.
contact VaporFi for help becoming a franchise owner
VaporFi is happy to assist you in finding ways to obtain the funds necessary. Contact us today for more details and assistance with purchasing your ideal franchise.