Franchise financing is a very important beginning of starting your Business plan. Do you really need to make a business plan? The short answer is yes. The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Many factors critical to business success depend upon your plan: franchise financing, equipment leasing, commercial real estate finance, outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.

Some people assume that if they are not going to seek franchise financing support from lenders or investors to open their business that they don’t need to prepare a business plan, but every business should have one. Writing a business plan serves as a road map for your venture when you’re starting out. It can help you figure out many key business elements, including:

  • What you will need to do to get started and what resources (time, franchise financing) you will need to expend
  • What it will take for your business to make a profit and how long that will take…will you need a commercial real estate finance loan?
  • What information potential customers, vendors and investors will need to know in order for you to market your business effectively

Writing your business plan also forces you to think about your business objectively. When you’re done, you will have a more realistic idea of the effort it will require and whether it’s a venture you want to pursue at this time.

Even if you are starting a business from scratch or looking at a franchise you want to create that road map on how you’re business will be executed. A plan will help determine projections of profits, expenses, and if you need financing to start. Franchise financing is just one solution we offer our clients.

When it comes to franchise financing, we have the ability to get the financing you need. Financing a new business or purchasing an existing business can be challenging and lenders look at a new venture as risky, especially if you are a first time business owner. Lenders however like franchisers because there is a history of sales and a corporation to back you up.

It’s best if you can obtain the credit you need using business credit instead of personal credit so that your personal assets are not at a full risk. Also lenders are apt to loan more money to a business than to an individual.

The Small Business Administration (SBA) works as a helping hand for small businesses in the U.S. It is specifically meant to provide lending to small companies. The kind of loan varies with the needs of borrowers, and in some cases the loans can be customized. SBA’s real motive is to support small businesses so that they can contribute well to the economy.

Established on July 30th, 1953, under President Eisenhower, the SBA is one of the most successful federal agencies. Although entrepreneurs do not acquire funds directly from SBA, the agency however has ties to local banks, financial institutions, credit unions, and other lenders. The SBA works behind the scenes through backing loans with the repayment guarantee to lenders by business entrepreneurs. There are multiple loans available for small businesses. Among the most common are the SBA’s (7a) loan, 504 loan, and its microloan program.

SBA (7A) LOAN PROGRAMS:

This program is quite popular among the budding entrepreneurs and existing business owners. The maximum amount that a small business owner can borrow is $750,000.

Companies can use SBA loans for working capital, buying real estate, machinery and equipment, and debt refinancing.

During the credit crunch, big banks in particular have been somewhat reluctant to provide funds to start-up business owners. Their approval criterion is largely based on 3 years financial statements of the business. However, when SBA guarantees and helps new entrepreneurs in the approval procedure then only it makes a start-up business owner eligible for loans.

Moreover, SBA (7a) also has sub-categories like express programs, export loan programs, rural lender advantage programs, and special purpose loan programs.

504 LOAN PROGRAMS:

The program is also known as Certified Development Company program. This loan program is basically designed to arrange funds for purchases of assets including land and equipment.

The eligibility criterion for 504 Loans includes three parties: The business owner/borrower, financial institution/lender, – and CDC (Certified Development Company), an entity designed to provide loans to companies in disadvantaged areas.

MICROLOAN PROGRAMS:

The purpose of microloans may seem to be the same (i.e. working capital, purchase of furniture, machinery and equipments) as for 7(a) loans. However, this program is generally for short-term loans up to $35,000 for small businesses as well as service agencies. Instead of banks, the sources of capital are non-profit organizations which have designated only to microloan lenders.

The vital point before even filing a loan application is the specific loan amount. That way, the borrower can understand which type of loan is the most appropriate to request. As an entrepreneur, you have to have a clear view regarding the amount and its usage.

Having the proper supporting documentation is an extremely important aspect of a lending procedure. Banks and non-bank lenders and the SBA ask for papers related to your business and personal statements, tax returns, and other permits. Borrowers must diligent in submitting financial documents or else they will not be able to secure capital.

You may have big dreams to start-up business or huge targets for your ongoing business. But, how will you realize those dreams and targets unless you have a sufficient amount of capital. The SBA works as a link that can find a way for you.


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