You are interested in purchasing a franchise business, and are wondering how you can finance the "start-up" money or capital that you will need to finance a franchise purchase. You know that you will not be receiving an inheritance or lavish monetary gift anytime soon, so you are looking at other ways to get the money.
There is money available, and there are different ways to obtain it.
- Personal, Secured, Unsecured Loans
If you can find a financial institution that will loan you the amount of money you need, you can apply for a personal loan. Types of personal loans can include secured or unsecured loans.
Secured loans are those loans in which you "put up" some type of security. This may include your home - these are sometimes referred to as "home equity" or "second mortgage" loans. Money that is in a savings or other similar account can also be used as security. Additionally, any personal property that you own can be used.
An unsecured loan is just that - there is nothing "backing up" the loan. These are possible, but sometimes very hard, to obtain.
- Small Business Loan
Loans that are specifically made for the purpose of starting a business (and this includes purchasing a franchise) are sometimes referred to as small business loans. They can be financed by either a private financial institution or the Small Business Administration. Additionally, there may be loans available from the Federal Government.
- Financial Backer
A financial backer is different from a partner. He is simply giving you all or part of the money with which to purchase the franchise. Financial backers may choose to remain totally anonymous, or they may ask that at least a token gesture of recognition be given.
Some may ask to be slightly involved in the operation of the business, while others may never take any more interest in it, even though they have an investment.
There may be some tax legalities involved with receiving money from a financial backer. Both you and the backer will need to consult accountants for sure and possibly attorneys also.
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