tips to follow while planning franchise financing


One of the most significant steps in planning a franchise is its financing. No doubt, there are many logistics involved, but before you start the business and open your doors to the public, you need to fund it. It means you need to plan your finances well and make sure that you have all the necessary paperwork in place.

Franchises come in varying price ranges. It’s very likely that well before reaching the buying stage, you know exactly how much you plan on spending. The nature of business and the associated overheads are just some of the aspects that affect its price tag, Regardless of the amount you are spending, ensure that your finances are in the right order.

Some Financial Tips to Follow

Here are a few smart financial tips that you should look at before investing in your future franchise. These steps can help you save some money so that you are on a sound footing from the get-go:

1. Ask Relevant Questions When Buying Your Franchise

Before you begin looking at lending options for your venture, ask questions. Don’t shy from asking too many, as there is no such thing. Your lender and accountant can point you in the right direction, by helping you understand what lies ahead. Go through all the logistics before you make any solid commitments to purchase the business. Doing so will mean you have a thorough plan for the future with no nasty surprises.

2. Build a Cordial Relationship with Your Lender

Purchasing a franchise is a big decision so you need to build a good rapport with your lender. Discuss your needs and doubts via emails or calls as and when they arise. A good lender would be more than happy to answer questions, clear doubts and offer solutions. If they are not proactive in their approach, look somewhere else for the funding you need. This holds whether you are dealing with a family member or any other private lender or investor as well. While you might not have heaps of forms to fill out, there would still be some paperwork involved. You must maintain a professional relationship with the lender/s involved.

3. Be Patient

You mustn’t try to rush through the process and let things play out as they are meant to. Certain formalities and processes take time and being impatient will only rock the boat. Sit back and just focus on the other areas of your franchising venture until the funding comes through, then take the next steps as required.

4. Be Particular About Running the Numbers

Have clarity about how much you are borrowing and paying. This is far from a standard loan and your business needs to remain profitable while funding itself. Factor the franchising fees into your calculations too. Franchises have far greater success rates than traditional businesses because they create and replicate a proven business model. However, you still need to know how the numbers ultimately pan out.

5. Know What Your Financial Rights Are As a Franchisee

In addition to being aware of what you are paying, you must have a full understanding of the financial contract’s terms and conditions. Would you have to pay any penalty in case of an early pay-off? Can you pay late or extra and are there any related fees? While you might not have to deal with any of these circumstances, you still need to know the consequences in case the need arises. Once you have clarity of the lending process, you can stay within the limits and avoid any issues from cropping up down the track.

6. Look for Lending for Small Businesses

Understand what small business financing options are available in your area. Some lenders offer small business loans with lesser terms or better interest rates. Speak with your accountant and other franchisees within the network and get their advice and inputs. The groundwork you do will help you start on the right foot.

For more information, feel free to call the franchising experts at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact us form, and one of our experts will contact you as soon as we can.

Thanks for reading,
The Franchise Institute Team
1300 855 435

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