How to Finance a Franchise Startup

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Franchise buying is a founding move toward a small or medium-size business ownership. Lots of people find the high success rate of franchising very alluring. And in addition, you have the great advantage to be your own boss.

The franchise picture looks indeed very attractive, but like a serious business venture it requires some capital. That is the major concern which usually stops people from purchasing franchises.

Here are few idea on how to fund a new franchise opportunity options.

Traditional Financing

Lending and financing institutions such as banks and others are considered traditional. They are a common source of financing for any large buying. Yet, in the current economic setting traditional financing is hard. The lending requirements have been tightened by most banks, and in particular for small business ventures. Therefore, many people find difficulties to secure financing from the traditional sources.

Franchisor Financing

Larger franchisors, mostly food or coffee shops chains, often tend to offer financing opportunities to their franchisees. The financing can come from two different sources. The franchisor can fund you itself. The other option is a third party which has an established relationship with that the franchisor.

For many, this is a great source of financing. Though, your franchisor may not provide such options. So you must consider more opportunities.

Investors

Finding a reliable investor to finance your franchise start up, naturally could be a great driver for you business. Moreover, in a country like the United Arab Emirates where the majority of the local population enjoys excessive income, it is not hard to find an investor. Of course, there are lot of things you need to consider. If you choose close relatives, friends and family for investors, this can ruin your start-up and your business will be in danger. Personal relations should be avoided in business. Once you find an investor, you have to set a clear detailed writing agreement, so that all business partners will know what to expect.

Home Equity

Here is another good, but risky franchising opportunity. Your real estate property could have kept or even raised its value. Using that equity for financing is could turn into new franchise option. There are two ways in which you can attain finances for your home. A onetime loan of serious sum is the first choice. The second is an ongoing line of credit. Though, this could be very dangerous, because interest rates are higher and timeframes should be strictly monitored. If things in your business fail to succeed you can lose your home.

There are many ways to finance your franchise start up. Therefore, research your options carefully to be able to determine what suits best to you and your new business venture.

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