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“I can’t start a franchise business because I don’t have any money,” you think. Why are we our own worst enemies sometimes? We dream and ponder our futures, and then we become the naysayer in our own destiny. Yet, skimming franchise opportunities brings excitement.
Manyfranchisors offer funding for prospective franchise owners and last week we covered the traditional loan route, and those are worth considering. But there are other options for funding your initial franchise investment—especially if you don’t want to empty your savings account or pay high fees and interest rates. Instead, look at the money sources hidden all around you to buy your franchise.
1. Investments
You might think of investment accounts as set aside for emergencies or only for retirement. But what if taking a little now means an earlier and more comfortable retirement? Taking money from an investment might have penalties, but it could also make more money for you sooner. Do your homework and calculate your numbers. If you can make up for the cost of liquidating investments by a conservative estimate of anticipated revenue from your franchise, your hard-earned investment money might work harder for you in that franchise than in an investment fund.
2. Your Home
Most Americans own their home, and nearly 35% of them own it outright. Since a house is the single largest investment for many people, it can be used as a source of liquid capital. Lines of credit and second mortgages free up money that is already yours by using your home or other real property as collateral. Interest rates are lower than personal loans, and the interest paid is probably tax deductible. Ask your tax accountant how using your home’s valuable equity might feed your dream of being your own boss.
3. Credit Cards
Strategically used, credit cards can provide cash at surprisingly low rates, even 0%, for a limited time. With franchise fees as low as $10,000, a credit card might be all you need to jumpstart your entrepreneurial venture. And there could be tax benefits if the card is acquired in the business’s name. However, research thoroughly, and read the fine print about when interest kicks in and if the interest is retroactive at any point.
4. Sale of Assets
We sometimes forget the value of everything we already own. Why not get rid of those rickety antiques that no one sits on? Or the old RV that never leaves the driveway? The attic is probably a treasure trove of old baseball cards, bicycles, and fishing equipment. With a new business, you won’t have time to use these things anyway, and when you do eventually have time to enjoy them, you can reward yourself with the latest designs. Let the old stuff help fuel your new future.
5. Family & Friends
You might cringe at the thought of asking family and friends for money. For others, it is commonplace and expected that family will help each other. Whatever your family culture, take the time to develop a short list of those who might welcome loaning money at a mutually beneficial interest rate. Both sides need to agree and profit from an agreement. Be sure to put these in writing, no matter how much you trust the other. This is business after all, and soon it will be a business with your name on it.
Opening your own business franchise has an initial investment, but you probably already have hidden money sources to fund your new business. Look around, do your research, and start planning the opening day of your new franchise.
Anne Daniells is a co-owner of Enterprising Solutions, a professional services firm specializing in corporate communication and financial improvement for businesses where she shares decades of corporate and entrepreneurial experience—including franchise ownership—in her writings on business culture. She has authored hundreds of articles for publications including AllBusiness.com, TweakYourBiz.com, and MSN.com. Reach out via her website for more on where corporate culture, communication, and human architecture collide.