Find the Cash to Open a Business
Think Creatively; You May Have More Resources Than You Think
Money often holds people back from starting a franchise. But many people have access to franchise financing and don't even know it.
Should you consider:
- Asking friends and relatives? There may potential investors within your immediate circle. Yet, people usually overlook them when it comes to finding money to start a business. Yes, without care and communications, borrowing from friends and relatives might ruin the relationship. To avoid this, seek a partner (even if he/she is a silent one) instead of an investor. Clearly define the roles and what areas your partner will have input in. That prevents the headache of having an investor who offers unwanted input. The main reference point in either case should be a good legal document that clearly spells out who is investing what, under what terms and expectations for repayment, as well as who has say in various business decisions. Clearly set the terms of the loan and state when and how you are going to pay it back. Having a legal document instead of oral promises will help to keep the professional relationship separate from the personal bond. And it will make sure that you both understand what you're getting into.
- Taking loans from credit cards? If you have good credit rating and have been using the credit card for a while, you might think about using the credit card as a source for your finance while starting a franchise. It’s unlikely that you have access to the kind of credit lines that will allow you to fund your entire franchise start-up, but you may be able to buy initial stock or supplies. But, remember you’ll have to make minimum payments, often before you get cash flowing into the business. So use extra caution here and make sure you have the ability to pay at least the minimum payment before you get funds coming in. Some credit cards offer special incentives and assistance for small businesses, so check into those too.
- Using your IRA or 401(k) plans? You can borrow against these to purchase a franchise. It’s a complicated process and you must use caution to make sure you don’t incur tax penalties. Consult a professional like Guidant Financial which specializes in unlocking your nest egg.
- Borrowing with a Small Business Administration-backed loan? These can be easier to get when purchasing a franchise than when starting up a stand-alone business. Many franchises are already pre-approved and some can even help you with the paperwork.
Regardless of which of these might help you get into a business, the point remains: with a little work and consideration, you might find you have the money to get started in owning your own franchise business.
The copyright of the article Find the Cash to Open a Business in Self-Employment is owned by Sandy Smith. Permission to republish Find the Cash to Open a Business in print or online must be granted by the author in writing.
