Tuesday, 9 July 2013

Finding Small Business Finance For Your Franchise Shop



Shelly Brooke, a young entrepreneur with a degree in management studies from a top-notch university, is planning to get a franchisee of a famous retail chain. She is not alone in doing so going by the recent industry trends and statistics. An increasing number of small entrepreneurs are deciding in favor of a franchisee purchase rather than opening an entirely new venture. The shift in attitude of business people towards franchise setup has largely been brought over by the perceived benefits attached to franchisee buying than getting involved in an independent startup. Grand plans of expansion and deeper penetration into the consumer markets by bigger corporate chains has also been a critical reason why franchisee route seems an easy option for young turks.
                                                 
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Small Business Finance






Buying a franchisee of a reputed brand can churn greater revenues without making the entrepreneur struggle hard to establish it on a firm foothold. There are fewer hardships in buying an already-proven franchisee than as experienced in the case of a new venture. A small business entrepreneur will not have to worry about building the name of the franchisee in the market as marketing and branding concerns are already taken care of by the franchisor.



Besides the advantage of cashing in on an already established brand name in the market, small business owners of franchisees can also rest their concerns about franchise financing. Securing funds to drive the franchisee forward is not too difficult. Franchisee business loans are made available by banks and private lenders. At the same time, there are other means through which franchisee funding has become easy to attain. Availability of funding options for franchisee purchase has encouraged entrepreneurs to go for franchisee buys than to get muddled up in new ventures. Following are a few effective means of finding funding sources for a franchisee shop.

Access Bank And Private Funding
Banks are taking on an encouraging role in the credit markets to make funds readily available to small businesses and young entrepreneurs. Business owners approaching banks with solid franchisee buying plans are getting adequate fund support from banks as franchisee route is considered a safer option than independent startups. The most critical things to ensure for being eligible for franchisee business loans from banks are improved credit scores, strong financial background, a lucrative business plan and also proof of loan repayment capacity. Bank franchisee loan request for purchase of a franchisee may get declined or rejected if a small business owner fails to meet any of the standard application norms or acceptance regulations as required by banks before providing financing aid through loans. Furnishing complete financial information is necessary to let the bank evaluate the financial position required to sanction a loan to buy a franchisee.

Showing Proof Of Consistent Cash Flow
Franchisee business loans are made available to new businesses and small firms on the condition that they provide the lender with authentic and necessary proof of consistent financial performance. Private lenders and traditional sources of financing are often wary of lending to organizations that lack in consistent cash flows. Inconsistency in any profit or financial statement is a red flag for lenders when reviewing the business loan request for a franchisee purchase. Small entrepreneurs with better track records are likely to get approvals for their franchisee business loans proposal than those failing on the parameter of good business performance.

Choose Franchisee Wisely
Choice of an entrepreneur with regard to the purchase of a franchisee of a brand often affects their funding. Lenders show willingness to finance a borrower if it has plans to open a franchisee of a well-known conglomerate. Small businesses with plans of buying franchisee shops of lesser-known companies are less likely to receive strong financial support from banks and private lenders. Adverse economic environment has made banks adopt a cautious lending approach towards borrowers with plans to set up franchisee of high-risk profile companies.


Take SBA Loans
The U.S. Small Business Administration (SBA) is renowned for extending financing help to small businesses in the country for promoting their growth and driving the national economy. Among the variety of loans they offer, franchisee business loans form a critical share of loans extended to new startups for fueling their plans to buy franchisees of well-established brands. The best part about taking SBA-backed loans is that there is no requirement of small businesses to secure collateral against their loans. Records showing healthy business performance by a franchisee loan applicant can help it to secure funds for franchisee purchase. Often such loans are extended at favorable repayment lines and with minimum interest rates.

Internal Financing
Often franchisors provide with funding support to capable small business applicant who it finds eligible to set up a franchisee shop. When taking on the internal funding support extended by franchisor, an applicant may get exemption from the initial franchisee fees. Besides, the beneficiary of internal financing from franchisor may not be required to pledge a collateral for the loan.

Tapping Retirement Funds
When other financing sources for buying a franchisee dries up then it is best to look at the personal savings. Taking out money for the Individual Retirement Account can provide a small business borrower with enough funds to purchase a franchisee.

AboutBiz2Credit
Founded in 2007, Biz2Credit is a leading credit marketplace connecting small- and medium-sized businesses with lenders, service providers, and complementary business tools.  The company matches borrowers to financial institutions based on each business’s unique profile — completed in less than four minutes — in a safe, efficient, price-transparent environment.
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