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
- 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
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
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.
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
- Refer you to
financial professionals experienced in securing financing for franchise
- Close your loan
transactions if you borrow from an SBA lender or other bank, finance
or leasing company.
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