Financing Tips
FINANCING TIPS
Work out what you can afford?
For an established successful franchise a rough guide is to that the banks will usually lend up to 70% of the total cash requirements. If you have, for example, savings of £30,000, you could expect to be able to finance a franchise with start-up costs and working capital totaling £100,000. Security will probably be required for at least part of the money. For a new or relatively untested franchise with an increase in risk for all parties, the money available will probably be nearer to the traditional pound for a pound basis i.e., a need for £20,000 contribution into a start up cost of £40,000. The more tried and tested the franchise, the better the terms.
Projections and contracts
Ensure your financial projections cover all the foreseeable expenditure in setting up the business. Remember businesses need time to establish themselves and may not grow as quickly as you first envisage.
Not being able to estimate the amount of money you need is one of the main pitfalls of starting a new business.
Evaluate all possibilities
If, after all you’re research looking at the good and the bad, and you are still encouraged, discuss your plans with an accountant, experienced businessperson, business advisor, and importantly your bank manager. Cash flow, working capital needs and profit projections are the core of preparing a good business plan. If is a realistic plan and the franchise is a good one, you should start to see a return on your investment in one to three years. With a growing awareness among business people of the benefits of franchising, there are an increasing number of franchise opportunities available. However, you must evaluate each situation very carefully before parting with any of your money, even a deposit.
Talk to your Franchisor and use their contacts before searching for outside financing, get approved or pre-qualified.
The most common source of start up capital is friends and family, use them.
Seek out lenders who understand not just small business but franchising as well.
Be totally upfront and honest with lenders., hide nothing be prepared to explain everything.
Neatness counts, fill out your credit and loan applications neatly. Typed if possible.
Don’t weigh down your loan applications with documents
Don’t exhaust your liquidity by paying off outstanding debts before filing a loan application, lenders want you to have capital.
If you lack liquidity, find a partner with money.
Consider equipment leasing to conserve start up capital and improve the appearance of your balance sheet.
Keep debts and expenses to a minimum. Many Businesses take on too much debt, forgetting that cash flow must pay that debt.
Consider buying used equipment, furniture, vehicles etc..
Let your mouse loose on the Internet before wasting time, on energy, gas and phone calls. You'll find useful information. Some site's even allow you to file loan applications on-line.
Don’t overlook angel investors and venture capitalists. Many have cooled to the high-tech sector and are seeking alternative investments.
Avoid dipping into your retirement money or the kids school funds, any start up, even a franchise is a risk.
Don’t give up, try, try, try again.
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