When striking out as an entrepreneur, three avenues are available.
There is the business opportunity where one can buy or lease a product or service, open a location and generate income as an independent representative of that product.
Another option is a start-up business, which is the establishment of a new product, service or solution; in many cases, in an area where success is not visible or guaranteed.
The third option is to buy into a franchise.
A franchise is an expansion of an already established brand.
The new business buys the right to use the same name, logo, and products as the “franchisor” or owner.
H&R Block, McDonald’s, and Best Cuts are well-known franchises.
Franchises are proven business models, which means banks consider successful franchises to be a lower risk and are more likely to loan money.
Since the brand awareness is already recognized by consumers, the chances of building a successful customer base are significantly improved.
When seeking franchise financial resources, there are some opportunities that did not exist until recently.
In the past, selling cherished assets, maxing out credit cards, depleting retirement savings or borrowing against your home were the only options, if the bank declined to take a chance on your new business.
Take a look at these four creative ways to raise capital to start a new business as a franchisee:
- Crowdfunding your franchise gives the community and non-traditional investors an opportunity to back your business venture. If it is an investor-backed fundraising you, the franchisee, will be expected to give backers a piece of ownership. Crowdfranchise.com is where you can set-up a website portal to start raising funds, but it’s up to you to approach and sell the business opportunity to get potential investors interested.
- Micro-Loans are when private companies and non-profits are willing to offer small loans to individuals who do not qualify for bank financing. Companies such as CanCapital and Patriot Express Loans for veterans are two sources. Microloans range from $500 to $100,000 and are backed by alternative lenders who have a vested interest in finding innovative ways to help small business owners succeed.
- Peer-to-Peer Lending has been around in the form of “lending clubs”, that usually contain like-minded businessmen or ethnic groups that pool money for the purpose of making interest-backed loans. Today, the term P2P lending is more often an online service that matches lenders directly with borrowers. The loans can be unsecured or backed by assets, and often the bank will set the interest rate. Check out this list of P2P online loan sites.
- Family and Friends are the people who believe in you the most and can be an excellent source of funding. They tend to share in your excitement of building a business and watching it grow to a profitable franchise. Make sure that with any funding from family or friends, you legalize everything with a promissory note. A promissory note is a written document promising to pay the bearer a certain amount of money at a specified date. Your intention should be to use their money to successfully get your business up and running, but to pay it back sooner rather than later.
Other lending programs exist when the banks do not want to take a chance on a beginning entrepreneur.
The U.S. Small Business Association (SBA) offers various small business assistance programs and will help facilitate a loan with a third party lender.
Contact us to learn how our commercial janitorial and green cleaning franchises may be the perfect fit for your entrepreneurial venture.
Our company is experiencing tremendous growth, and Vanguard Cleaning Systems has ranked #5 on USA Today’s Top 50 Franchises for Minorities, and #11 on Entrepreneur Magazine Top 100 Franchises for Veterans.
In Bakersfield CA, call (661) 395-3009
In Fresno CA, call (559) 473-1790