Are you ready to be a franchisee, but you do not have the liquid assets necessary to make your big purchase? You can still own a franchise! Learn the basics of getting financed and you'll be on your way to becoming the owner of your own business.

Most franchises, big or small, require some amount of cash. Regardless of total investment, some franchisors require that prospective franchisees possess a large amount of available cash, while others require less liquid capital. Whether you need a lot of additional cash, or just a little, you will need a business plan and a source of funding in order to purchase your franchise.

One thing to consider is that debt should not be taken lightly. Franchises tend to have a very high success rate in comparison to regular businesses, but there will still be risk involved in purchasing a business. Do not use your retirement fund, or your children's education funds. It is not a good idea to re-finance your home for your business. There are safer ways to get financed, so research your options thoroughly.

Creating a Business Plan

You will need to have an elaborate business plan created and written up either before or during the franchise buying process. Some franchises will help you build your business plan, while others leave it to their prospective franchisees to create their own. A business plan is not only necessary; it will also be helpful to you as you plan your future. Your business plan will act as your map as you travel along the road to becoming a franchisee. The best business plan will be continually updated. It will be creative, informative, and convey your excitement about owning your own business. Below are simple guidelines to help you prepare your business plan. For more in-depth information, do research on the Internet, in books, and consult a professional.

Step 1: An Executive Summary, which will have a complete description of the franchise. This description should include an analysis of the core business, and any information supplied to you by the franchise company. You will want to list products and services, opportunities, risks, strategies, target market, competition, competitive advantage, financial and investment information, and projected return on investment.

Step 2: A Mission Statement, which describes the reasons for the company's existence. This statement will reflect your own philosophy as it relates to such things as the franchisor and their system.

Step 3: Industry Analysis, will include a clear understanding of the industry you're in, your competition, and your position in the market. This is the most important part of the business plan and this section will be read more thoroughly than any other section. You may use visuals (graphs, charts, etc.) in this section to compare your company with those of your competitors.

Step 4: Demographic Information about the area you've proposed to have your business in. You must include information about the area, including facts about non-competing businesses.

Step 5: Market Analysis and Critical Analysis of why you will succeed. Analyze the market, trends in the industry, and describe and analyze your competition thoroughly. Prove that you know everything there is about the industry, the competition, and be confident that you will succeed.

Step 6: Describe Day-to-Day Activities, from number of employees and handling of employees to the maintaining of products and supplies. Also, include your organization structure and management techniques.

Step 7: A Marketing Plan. How will you attract and keep customers? How will you handle pricing? How are you going to succeed?

Step 8: Financing! This is an important section. All financial information must be laid out, from fees to a profit and loss analysis. Examine how much revenue you will need to break even and make a profit. Finally, examine your expenses and the income necessary for you to live on. Many experts recommend analyzing your financial situation for up to 5 years into owning your business.

Step 9: An Implementation Plan and Timetable will tell the reader "how" you will go about succeeding with your business.

Step 10: The Appendix may be filled with tax returns, articles about the company, industry, and community, and any other information that will help the reader better understand the details of your plan.

Finding Funding Sources: The Traditional Route

Funding Through Your Franchisor
Many franchisors have programs set up to assist their potential franchisees in gaining enough money to purchase and begin to operate one of their franchises. Typically, a company willing to do this will have funds allotted strictly for helping franchisees with funding. Each franchise is different. Some won't offer this option, and interest rates will vary. For more information, contact the franchises you are interested in purchasing.

SBA Loans
The Small Business Administration offers a variety of loans through its 7(a) Guaranty Program. These loans are designed to help small businesses secure the funding they require, but have not been able to obtain the traditional way: By applying at regular banks. The funds for the SBA loans come from private sector lenders, mostly banks, and are guaranteed by the SBA. Most SBA loans are not actually loaned directly from the SBA.

There are many SBA loan programs. The programs are tailored to meet all different needs... For example, there are loan programs designated specifically for minorities and women. Three qualifications that must always be met before one can receive an SBA loan are:

• You must have attempted to receive other forms of financing and all of your personal assets must be exhausted.
• You must have a reasonable amount of equity.
• Your business must be a for-profit enterprise, doing business in the United States or in its possessions.

For more information on the SBA and its loans programs, please call 1.800.8ASK.SBA.

Bank Loans
Try getting a loan through your local bank. It's a logical choice for many people and often soon-to-be-franchisees are able to receive the cash they need to purchase their franchise. Borrowing from large, national banks is also a great option.

Partners
Finding a business partner is an option for many soon-to-be business owners. You might be able to find a partner more interested in supplying the cash and receiving a percentage of the profit, than in running the business. Thus, you will still be able to manage your own business. These partners might want to have "say" in major decisions though.

Finding Funding Sources: The Non-Traditional Route

Family and Friends
It is perfectly acceptable to ask family and friends for financial help. Your friends and family know and trust you. Borrowing from family is a common practice and often the results are positive. Keep a few things in mind: Friends and family may be quite intrusive. They are not professional business partners, even if they may act as such financially. You will probably want to give friends and family some equity in your franchise. Additionally, if your business happens to fail, there may be hard feelings from personal business financers. If you can handle these factors, funding through family and friends may be a perfect choice for you.

Angels
Angels are wealthy private investors who are willing to take risk. Typically, they do not lend money to business owners. Instead, they are equity investors. They usually form a strong relationship with the business owner, and can sometimes hold much control in decisions made within the company.

Venture Capital Investment Groups
Professional venture capitalists tend to also be equity investors, not lenders. These groups tend to seek companies with the hope of a 20%-40% annual rate of return on their investment.

Special Interest Financing
Minorities and women might be able to get special financing, if traditional means does not provide enough funding. There are women angel investor groups that are made up of and tend to serve women only. There are programs to support minorities. There are investors interested in aiding businesses that want to open their doors in inner city areas. A search on the Internet for a specific type of funding will yield results.

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With a good solid business plan and some research into available sources of funding, you will be on your way to owning your own franchise. Remember, combining sources of funding is fully acceptable in most situations. Organization, foresight, and knowledge are integral factors in owning and funding a successful franchise.