Are you torn between starting your own business and buying a franchise? Don’t worry; you’re not alone. Individuals who seek business opportunities often have a hard time deciding between a franchise and a startup screen-printing business. However, if you haven’t got any experience yet, then you might want to start with a franchise.
With a franchise, you don’t need to work that hard to promote your business. Consumers already know of the company name, and you have a higher chance of starting a successful business. The best thing about purchasing a franchise is that an established company will guide you. Plus, it usually costs less than starting your own business.
This is not to say that the franchise doesn’t come with drawbacks. Like startups, franchising has pros and cons. But if you have already made up your mind about buying a franchise, the next step is to find a way to finance your business venture. What can you do if you have little to no money but wish to buy a franchise soon?
Consider the costs.
To buy a franchise, you are to pay the franchisor to get the rights and assistance to their brand name. This usually includes the initial franchise fee, operation investments, and royalty fee. The franchise royalty fee refers to the ongoing fees you pay to your franchisor. Such payments serve as your membership fee. Businesses use this to cover the expenses needed to support their franchisees.
Find funding options
You have lots of funding options to choose from. The first one is to use your own money savings. You can also tap on your equity, use your retirement accounts, seek franchisor financing, apply for a loan, or find yourself a business partner. Know that all options have advantages and disadvantages.
Consider the perks and drawbacks of each funding option.
Tapping on your home equity allows you to use your home as collateral in exchange for a lump sum of cash. Be careful when using your equity as your source of funding. You’re putting your home at risk if you fail to pay back the home equity loan. You can also roll over your retirement accounts to buy a franchise. Do this the right way, and you won’t owe taxes or have to pay penalties. Otherwise, you can lose all your retirement savings. Some franchisors also offer to finance individuals who want to buy a franchise but can’t afford one. You will need to have enough savings before you can convince them to fund your buy.
For people who have enough assets to use as collateral and have a good credit score, you can try pursuing a bank loan. Like home equity loans, your collateral is at risk if you fail to pay back your bank. Finding a business partner also allows you to finance a franchise purchase. It is best to seek the advice of an attorney so that they can draft necessary contracts for the partnership.
Now, it’s time to choose. Keep legal contacts by your side. This goes to show that one needs a big investment to buy a franchise. However, purchasing a franchise usually costs less than trying to build a company from scratch. Make sure to consider the franchise costs and to research opportunities before finalizing your decision.