Very often, the set up and establishment of a “franchise” or business will call for a big investment. Only a few entrepreneurs are able to find this investment from their own resources. Fortunately, various funding options exist.
Accessing these funding options is a different matter altogether, but being part of a reputable and well established franchisor, will give you a head start. What does this mean? You need to understand that there is no shortage for start up finance. Financiers accept deposits from investors and pay them interest and unless they lend the money to borrowers (in this case potential franchisees) at a higher rate of interest, they will soon go out of business.
However, what is in short supply, are reputable entrepreneurs who are willing and able to present financiers with a well thought out finance application,comprehensive and professional business plan.
Investors (including bankers) often complain about the number of people/entrepreneurs who approach them for finance without a proper “Due Diligence” of the venture the loan is being applied for. They cannot present a quality business plan or loan application, nor are they able to answer some very basic questions about their business in a convincing manner.
Do not fall into this trap – a little preparation goes a long way. Your banker/investor is going to ask some tough questions and they will expect you to provide realistic answers to the following questions:
How much money do you need and what are you going to do with the loan?
Can you demonstrate how this loan will help you to increase your profits?
How do you plan to structure repayments and what alternatives can you offer should the business’s cash flow fail to keep up with ongoing financial obligations?
What can you offer as collateral?