Opening a franchise requires a significant financial investment often including franchise fees and steep advertising costs. For some, who feel they may lack the financial assets to invest in a franchise, this can be quite daunting.
But it doesn’t mean it’s the end of the road.
If you’ve found the right franchise fit, done your due diligence, and know that the franchise model can help you fulfill your business goals, there are four options you can explore to help finance your franchise. You can learn how Jon-Anthony Lui, a multi-unit franchise owner of Tutor Doctor, got the cash needed for his franchise on the Franchise Canada Chats Podcast:
- Personal Savings:
Probably the easiest and most cost-effective way to fund your franchise is through personal savings. The advantages here are that you’ll know exactly how much money you have to put towards your franchise, you won’t have to pay back any interest on a loan, and you’ll retain complete control. Just be sure you have enough money saved to minimize the risks of personal bankruptcy or debt.
- Bank Loans:
One of the top reasons to go this route is that you’re likely to get a loan as part of a well-reputed franchise than as an entrepreneur starting a business from scratch. But, before you approach a bank for a loan, make sure your credit is in good standing, all the required paperwork (i.e. tax returns, personal financial statements), and a solid business plan in place. It doesn’t hurt to shop around and talk to different institutions about your financing needs.
- Government programs:
As a prospective franchisees, you are eligible for a number of government programs so long as you thoroughly understand and meet their qualifications. Keep in mind that the government loan application process can be long, which means it’s worth carefully considering your qualifications for a seamless approval process.
- Borrowing from Friends and family:
Finally, you can always turn to family members and friends for funding. The benefit of this option is that you can agree on your own payment plan with family and friends. This is often a more flexible option, as sometimes you can adjust the plan if your financial situation changes. But ensure everything is in writing to avoid disagreements in the future.
Remember to weigh the pros and cons of each financing method. Find out which options Jon-Anthony Lui considered and used to fund his Tutor Doctor franchises on the Franchise Canada Chats Podcast.