franchising aspects Aug, 20 2010

Procuring the funds

A quick guide to how to secure funds once you have decided to be a franchisee and have zeroed down on the brand and partner.

By Neha Malhotra
Sub Editor, Franchise India Holdings Limited, Web Division
Procuring the funds

The success of a franchised business is more definite than that of an start up business, which makes it more probable for a franchisee to get a loan. However, getting finance can be a cumbersome task when you do not know how to go about it. There are quite a few options that are available that can be of help while procuring a loan.

As a loan seeker, your aim should be to get the money with the least amount of collateral, at the lowest rate of interest and the best repayment terms.

Franchisors can ideally be the first choice for getting funds for your franchise. Some franchisors have tieups with lenders and banks which makes the loan process quicker and easier for the franchisee. It is said that if you get a franchise, then it means you will get finance and that is because you have the franchisor to back you.

Professionalism – the key

When a bank or a lender is giving you a loan, they are in a way investing in your business. Being professional in your approach is the key to unlocking the safe for getting your money.  You should approach banks and lenders in the best possible way. A credit standing, collateral and good communication skill is what will help you get the money you need.

Besides getting money with the franchisors help, you have several other options as well. Here are a few you can look at:

1. Soft loans
Soft loans refer to the money which is given either by friends, family or relatives. In such an arrangement, there is no specific repayment period and no compulsion to pay the interest at fixed intervals. Also in case the business fails, there may be no liability of paying it back as well which means that they can lose their money. But this can at times ruin relationships. This is the only thing that must be kept in mind while accepting money in such a deal.

2. Banks
Getting loan from a bank is the most difficult of all the other options that are available for financing. Banks work in an extremely professional manner and look at all business propositions with an inquisitive eye. So to get through with them you need to be closely aware of all the intricacies of your business and have an exhaustive and comprehensive business plan with realistic financial projections. This will make them understand your business proposition which will in turn make them willing to invest in your business.

3. Lenders
Lenders are people who have access to cash they are willing to invest. With lenders also you need a well crafted plan to give them a reason for investing in your business. The repayment time and the payment of interest can be negotiated.

Knowing where to get your money from is of great help in making your entrepreneurial journey a smooth one. Now you can see your project hit the runway!

Related: Franchisors dig deep for franchisee success

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