How to Finance a Franchise
There are several processes one should go through when starting a franchise business.
Funding the franchise is one major milestone in starting an entrepreneur’s business endeavor.
After you have determined the factors that you need to know in order to start your business, the next question that you need to ask yourself is on how you are going to fund your business. Do you have the ample amount of money on hand to start your own business? Or you still need financial aid from certain institutions or organizations?
In order to know whether you need to loan money from other company, you should first determine your net worth. Your net worth will help you to know whether you can afford to fund your business on your own or you still do not have enough funds and will need the help of a lending company.
There are several ways to know your net worth. You can either do it yourself or you can ask an accountant to help you compute for your net worth. A financial statement called Statement of Financial Position or also known as the Balance sheet it used to determine an entity or a business’ net worth.
Statement of Financial Position is composed of three major parts, the Assets, Liabilities, and Owner’s Equity of an individual or organization. Your Assets are your properties, cash on hand, savings account, checking accounts, real estate properties, cars or vehicles, insurance, and bonds. Your liabilities are composed of what you owe to other entities.
The basic equation in determining your net worth is “what you own minus what you owe”. This means that you need to subtract the total of your Liabilities from the sum of all your Assets.
After determining your net worth, you should be able to know on whether you can finance your business yourself or not. In the event that you do not have the enough amount of money on hand, you can consider borrowing from lending companies.
One thing that you should know in borrowing money is the amount of interest that you should pay. Always remember that the higher the amount that you loan, the higher the interest that you need to pay will be. Make sure that you only borrow the amount of money that you are sure that you can pay in due time. If you pay behind schedule, chances are you will incur additional fees or also known as penalty.
Alternatively, you can ask your franchise company on whether they provide financial or funding aids for their franchisees. Most franchise companies help their franchisees in funding their business.
Finally, you can consider seeking advice and recommendations from people you may know who also own a franchise. These people will more or less be able to tell you the necessary things that you should know in running a franchise.
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