LEVERAGING EQUITY IN FINANCING YOUR FRANCHISE

First time franchise buyers often make two mistakes in financing their new business enterprise.

  • First, they underestimate the amount of money needed to get the business running successfully.
  • Second, they pass up opportunities to leverage their equity and preserve their own funds for unforeseen needs.

As part of our counsel to franchise buyers, we analyze your financing plans and make recommendations about your entity’s capital structure. We may suggest debt financing even if you feel that you may not need it. Small Business Administration Section 7 guaranteed loans are the most common debt deals in franchising. We can help you understand what’s available, and close the loan you select.

We will help you understand that preserving funds for later use is prudent in many cases. We may suggest that you pursue equity partners among family and acquaintances, and we can structure your corporation or limited liability company to allocate voting control and economic ownership however you and your partners wish.

Do not assume that you can afford a franchise investment just because you have personal funds in the amount of the initial investment described in the FDD.

  • Financing the entire investment with your own equity may not be advisable.
  • The FDD estimate of total investment could be wrong, especially if the opening of your franchise is delayed or your sales are lower than expected for a period.

What We Do For Franchisees Seeking Financing

  • Guide you in the selection of a sensible capital structure
  • Document your corporate entity’s capital structure and your partnership arrangements
    • Articles of Organization
    • Operating Agreement
    • Buy/Sell Agreement
  • Refer you to financial professionals experienced in securing financing for franchise investments.
  • Close your loan transactions if you borrow from an SBA lender or other bank, finance or leasing company.

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