Franchising is a great way to make a living, to support your family, and to plan for your golden years. The hard part for many entrepreneurs isn’t running their businesses; it’s finding the capital to get the enterprise off the ground.
According to statistics from the Small Business Administration, a third of all businesses will fail in the first two years and only 44 percent survive four years. There are a variety of reasons businesses don’t make it beyond the first few years, and many of them tie back to the money. Inadequate funding restricts opportunities in a variety of ways.
Below are the seven best and most popular options for funding a franchise:
Sell Unneeded Items
eBay has made a fortune from people selling items they no longer want or need. There are your prized baseball cards or comic book collections, that tract of land left to you by Great Grandma, etc. There are often many items around the house that have not only sentimental value; they have financial value, too. Consider parting ways with them so that you can get a new business under way.
Home Equity Line of Credit
Home equity financing is one of the cheapest and fastest sources for debt financing available. There are two kinds of home equity debt financing: home equity loans (sometimes called a HEL), and a home equity line of credit (also known as a HELOC). Both of these are considered as a second mortgage.
A home equity loan has a fixed rate and fixed monthly payments which has to be made until the total amount has been paid. The money is given in a lump sum; thus, once the borrowed money is paid off, you cannot get a home equity loan again. As for a HELOC, the money is not all given at once, and you are allowed to borrow funds in increments up to your credit limit.
The amount that you are able to receive for either option is based on the value of your home, which means your equity fluctuates over time. The amount of equity you have in your home can be calculated by taking the current market value of your home and subtracting any outstanding.
A home equity line of credit is a fantastic way to fix up a house — to get new siding, repair the driveway or put on a new roof. It can also be used to help get a new business off the ground. Like with any source of funding, do your homework. There are a number of institutions that can offer home equity lines of credit: banks, credit unions, savings and loans, mortgage companies. The difference between what you owe on your house and what it’s worth might be just what you need to get your franchise started.
Angel Investors and Venture Capitalists
Angel investors are wealthy individuals who provide funding for a percentage of your company; they’ll sometimes provide capital if even the idea for a business appeals to them. Venture capitalists prefer joining the process later, once there are proven results — they’ll also generally want more stakes and say in the business. A franchise is a great fit for venture capitalists because the business model has already proven to be successful.
You might be able to find an angel through a local chamber of commerce or trusted business adviser. Many communities have small business development centers or a similar organization to help new entrepreneurs locate investors.
Maxing out your credit cards is another business cliché, but there’s a reason it’s a cliché — so many people have done it. The nice thing about credit card debt is that the monthly payment can be quite low. But paying just the minimum means the payback period can literally extend decades, and the ultimate cost of that loan is considerable. Charge card and credit card companies, as well as some electronic payment solution companies, may offer deferred payment options.
Bank or Small Business Loan
Banks are one of the most traditional forms of lending and they’re equally notorious for refusing new business owners money. Banks like to see history and a track record of success. Franchises, especially those with a well-known brand name and many proven successful locations often have better chances at being funded. You also need collateral, which means putting up a valuable asset such as a home.
The Internet has created extraordinary opportunities that simply didn’t exist even a decade ago. With a good idea and a bit of salesmanship, you might just be able to finance your business from people around the world. Crowdfunding is the modern-day version of borrowing a little bit of money from everyone you know. Crowdfunding websites have brought that fun to the Internet. If you’ve never heard of it, the way it works is this: Anyone can contribute money toward helping a business that they really believe in. An entrepreneur will put up a detailed description of his/her business on a platform such as Kickstarter–goals of the business, future financial strategies for turning a profit, the target audience, how much funding he/she needs and for what reasons, etc.–and then consumers can read about the business and give money if they choose. Generally, those giving money will make online pledges with the promise of pre-buying the product, giving a donation, or earning some type of reward
There are many websites that allow crowdfunding, and all offer ways raise money for an enterprise. Each site has its own rules and restrictions — some limit projects to creative endeavors, for instance — so make sure to read the terms before jumping into it.
Friends and family
If you have a friend or relative with some spare cash, you have another potential way to finance your business. Borrowing from friends and family presents an interesting alternative to traditional forms of financing, and can have some unique advantages, including low- or no-interest payments and avoiding the hassles of bank contracts.
It’s important to analyze all angles of your business and your future goals and then analyze each type of funding opportunity so that you make sure you’re starting your business off on the right foot.
You can see that all of these options require work and commitment on your part, so there is no magic or free money. Every funding decision is a complex tradeoff between near-term and longer-term costs and paybacks, as well as overall ownership and control.
With the many options available, there is no excuse for not living your dream, rather than dreaming about living.
To learn more about the Skedaddle Humane Wildlife Control franchise, visit www.skedaddlefracnhise.com or call 1877-662-2877.