You’ve always dreamt of opening a franchise. The thought of being your own boss and achieving financial independence has been appealing for years. But with such a major investment at stake, do you have the available funds to make it happen? The reality is that many aspiring franchisees are concerned they don’t have enough to own a franchise. Even so, it’s more than possible to get started on a limited budget. Keep reading to see how you can buy a franchise when funds are tight.
- Look at start-up costs – Franchise Gator mentions that starting a franchise can cost anywhere from $10,000 to more than $1 million. Before getting bogged down in everything, take a close look at the franchisor’s Franchise Disclosure Document. Note that the cost to join the franchise system, known as the franchise fee, may cost up to $40,000. Additional costs to account for include real estate, equipment, inventory, signage, insurance, and legal advice.
- Determine what you can afford – Have you ever calculated your net worth? If not, now’s the time to do so. Create a balance sheet that lists all of your assets and liabilities. It’s strongly recommended that you invest no more than 15 percent of your own money when opening a franchise. Unless you have the funds readily available in a savings account, chances are that you will need to borrow from a general lender. Soon-to-be franchisees can expect around 20-25 percent of the total investment. Just remember to take care of any past due bills and mistakes on your credit report prior to meeting with the lender.
- Traditional loans – If you have good credit and collateral, you may be able to obtain a traditional loan from a bank. One advantage of buying a franchise as opposed to starting an independently run business is that lenders usually side with the former because of the established brand.
- Franchisor assistance options – Interestingly, the majority of franchisors in the U.S. offer debt financing and will back a portion of the loan. Should you pursue this strategy, make it a point to check with the franchisor regarding terms and repayment requirements. In some instances, franchisors can help with leasing necessary equipment or offering incentive programs for first-time franchisees.
- SBA Loans – If you’re really pinching pennies and can’t put forth a sufficient down payment, a Small Business Administration loan can help. SBA loans are still made by a financial institution but typically involve longer, more flexible repayment terms and carry lower interest rates.
- Borrowing from yourself – It shouldn’t be your first option, but it’s possible to borrow from your retirement savings to open a franchise. Rollover as Business Startups give you the freedom to use an IRA, 401(k) or 403(b) to pay the initial costs of a franchise. If you’re financially savvy, you may already know that withdrawing from a retirement account incurs a tax liability. However, one way to avoid such a penalty is by opening a securities backed line of credits instead. This loan is secured by your own investments and doesn’t require you to take out money from those retirement accounts.
- Get creative – Even with the aforementioned tips, are you still struggling to fund your franchise? Then it could be time to explore online lending from companies such as Kabbage and On Deck. Though these options may not be able to provide enough financing to cover all initial costs, you should be able to at least make a dent in them.
Opening a Franchise with Rebounderz
There’s no question that affordable franchises are hard to come by, even if you do everything imaginable to make it happen. The Rebounderz franchise is an exception. Rebounderz is one of the fastest growing family entertainment franchises in the industry. We are committed to being the leader in innovation for indoor family entertainment centers, family adventure parks, and extreme fun centers. Rebounderz takes family fun to the next level with our patented trampoline Combination & Dodgeball Jumpers, custom Ninja Warrior courses, Air Pit Jumpers, JumpXtreme Towers, and much more.
Don’t let lack of funding stop you from achieving your dream of owning a franchise. Our team will work with you to make it become a reality. Learn about growth opportunities with Rebounderz today.