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Work at Home : Special Reports : Finance : HOW AND WHERE TO GET MONEY FOR A FRANCHISE IDEA

HOW AND WHERE TO GET MONEY FOR A FRANCHISE IDEA

	How often have you thumbed through a business opportunity magazine, noticed a
franchise opportunity advertisement, and felt you'd really like to get in on that...if only
you had the money?  If you're like most who are seeking greater opportunity and wealth,
this probably happens with you more often than you care to admit, except perhaps in
strictly private conversations.

	When the average person sees one of these opportunities, or comes up with a
similar idea of his own, the problems of start-up capital may seem formidable. But in
reality, they may not be.  In fact, just about anyone with a good credit record and an
"insider's sense of business" can get the capital he or she needs, whenever it's needed.
The secret is in knowing how to put together a proper proposal, and to present it to the
right per son. These are the "how-to" instructions we're going to give you in this report.

	The first thing you're going to need is a complete business plan.  This is a
complete and detailed description of exactly how you intend to operate the proposed
business.  Your business plan should detail precisely the product or products you plan to
sell; how you're going to produce or manufacture the product; your costs (inventory costs
if you're purchasing them from a supplier); who is going to sell those products for you;
how they're going to be sold; the attendant costs; when you expect to recoup your initial
investment; your plans for growth or expansion; and the total dollar amount you're going
to need to make it all work according to your plan.  Your business plan must be detailed -
complete with projected income and expense figures - through at least the first three years
of business. For more details, and "how-to" instructions, see our re port, HOW TO
PREPARE A PROF IT ABLE BUSINESS PLAN, report #3503.

		Now, assuming you have your business plan all worked out, put together
and ready for presentation with your request for capital, let's talk about your capitalization
proposal.

	First, keep in mind that whenever you ask somebody for money, whether it's for a
small personal loan or a large amount of money to finance a business, you're involved in a
selling situation.  You have to prepare a "sales presentation" just as if you were getting
ready to sell an automobile or refrigerator.  Within this sales presentation you must have
all the facts and figures; you must anticipate the questions and the possible objections of
the prospective lender with answers or explanations; and you must "package" it as
impressively as you would yourself for an audience with the president of IBM or General
Motors.

	The more money you ask for, the more "in-the-know" will be the people you want
to borrow from, and so the more detailed and organized your proposal must be.  This
shouldn't cause you too much worry however, because you can hire a CPA to help you
put it together properly, once you've got the facts and have a business plan he can work
from.

	Look at it this way:  The more money you request for your business, the more
your lenders or prospective investors are going to want to know about you, your planning,
and your business.  They want to be impressed with the fact that you've done your
homework; they want to see that you've researched everything and documented your facts
and figures; they want to be assured by your presentation that investing in your business
will make money for them.  It's just that simple at the bottom line.  Unless you can instill
confidence in them with your business plan and loan or investment proposal, they're just
not going to give much positive thought to your request for capitalization.

	So you'll need a balance sheet describing your net worth - the worth of what you
own compared to the amount of money you owe. You'll also have to prove your stability
and money-management talents relative to how successful you've been in paying off past
obligations.  If you have had credit problems in the past, get them "cleaned up", or at least
explained on your file at your local credit bureau office.  Under the law, credit bureaus
are
required to give you all the information they have about you in their files, and it's your
right to correct any errors or enter explanations regarding negative reports on your credit.
Do this without fail because prospective lenders or investors will definitely check your
credit history.

	So, now you have your balance sheet prepared; your credit history organized in a
light that's favorable to you; your business plan (with costs and income projected over the
coming three years), you're ready to start looking for lenders or investors.

	Almost all franchisers offer help in setting up with one of their franchises.  Most
will go out of their way to assist you in getting the financing you need.  Some will lend
you the entire amount, with payments coming out of the income they expect you to make
from their franchise operation.  Many will carry this loan themselves, while others will
carry part of it and find you a lender to finance the remainder.

	Franchisers have two objectives in mind when they offer franchises to the public:
They are trying to expand their operation, thus increasing their profit, and they are trying
to raise capital for themselves.  Generally speaking, if you have a good credit history, and
if they feel you have the necessary business personality to achieve success with one of
their operations, they'll do everything within their power to get you in a franchise outlet.
Keep this in mind the next time you see an advertisement for a promising franchise
opportunity requiring a substantial amount of cash outlay.  You don't necessarily have to
have all the money.  They want you, and they'll help you!

	Many people seem to be unaware that most of today's largest corporations started
on a shoestring - on borrowed money.  Many people seem to feel that unless they've got it
all "in hand" in savings, then they'll just have to keep plugging away until they can save
up enough to take the big plunge.  Nothing could be farther from the truth.  Just a quick
bit of research will show that 999 out of every 1,000 businesses were begun on borrowed
money.

	Look to your family and friends for financial help.  Approach them in a business-
like manner; tell them about your idea or plans, and ask them for a loan.  Agree to sign a
formal statement to pay them back in three, five or ten years, with interest.

	When you have your proposal assembled, you might even want to think of a
limited partnership or even a general partnership arrangement as a way to finance your
project. In any kind of partnership, each partner shares in the profits of the company,
but in a limited partnership, each person's loss liability is limited to the amount of money
he initially invested.  The truth is, in this kind of a situation, you'll be doing all the work
and sharing your gain with your partners, but then it's a fairly sure way to obtain needed
financing.

	Another common method of obtaining business financing is through second
mortgage loans on a home or existing piece of property.  Say you purchased a home ten
years ago for $35,000, and today the assessed valuation is $85,000, with a mortgage of
$25,000 still outstanding.  A lender may consider your home to be security or collateral
for a loan up to $60,000.  In many instances, this is the easiest and surest way of getting
the money needed for franchise or other business investment.  And, it makes sense;
you've got "net worth" available that is doing nothing but sitting there.  Take this equity
and invest it in a worthwhile business, and you could double or triple your net worth each
year
for the rest of your life.

	Deciding to obtain a second mortgage on your home in order to finance a business
opportunity is without doubt a major decision, but if you are sure about your investment
project, and are determined to succeed, you owe it to yourself to go ahead.  You could
incorporate yourself, borrow money from your family through a second mortgage on your
home, and protect against the loss of your home through the Federal Home stead Act.
The important point here is that all business opportunities involve risk and sacrifice.  It's
up to you to determine the feasibility of your success with your proposed venture, then
decide on the best way possible to proceed.

	In every instance where you run into reluctance on the part of a lender to lend you
the money you need, explore the feasibility of "two-name" or "co-signed" loans.  You can
have the franchiser sign with you, or one of your suppliers, a business associate or
even a friend.  Oftentimes you can borrow or rent collateral such as stocks, bonds, time
certificates, business equipment or real estate, and in this way give greater confidence to
the lender in you r abilities to repay the loan.  Whenever you can show a contract from
someone who has agreed to purchase a certain number of your products or services over a
specified period of time, you have another important piece of paper that most lenders will
accept as collateral.  Still an other possibility might be to get a bank or a firm that has
loaned you money in the past to guarantee your loan.  They simply guarantee that they'll
lend you money in the future if ever the need should arise.

	Going straight to you neighborhood bank, applying for a business loan and
walking out with the money is just about the most unlikely of all your possibilities.
Banks want to lend money, and they must lend money in order to stay in business, but
most banks are notoriously conservative and extremely reluctant to lend you money
unless you have a "regular income" that "guarantees" repayment.  If and when you
approach a bank for a
business loan, you'll need all your papers in order - your financial statement, your
business plan, credit history and all the endorsements you can get relative to your
succeeding with your planned enterprise.  In addition, it would be a good idea to take
along your accountant just to assure the banker that your plan is verifiable.  In the end,
you'll find that it all boils down to whether or not the bank officer studying your
application is sold on you as a good credit risk.  Thus you must impress the banker - not
only with your proposal, but with your appearance and personality as well.  In dealing
with bankers, never show an attitude of doubt or apology.  Always be positive and sure of
yourself.  However, don't come on so strong to them that you're either demanding or
overbearing.  Just look good, know your stuff, and project an attitude of determination to
succeed.

	Your best bet, in attempting to get a business loan from a bank, is to deal with
commercial banks.  These are the banks that specialize in investment loans for going
businesses, real estate construction, and even venture programs.  Look in the yellow
pages
of your telephone or business directories; call and ask for an appointment with the
manager; and then explore with him the possibilities of a loan for your project.  One of
the "nice things" about commercial banks is that even though they may not be able to
approve a loan for your business ideas, they will almost always give you a list of names of
business people who might be interested in looking over your proposal for investment
purposes.
A lot of commercial banks stage investment lectures and seminars for the general public.
If you find one that does, attend.  You'll meet a lot of local business people, some of
whom may be able to and interested in helping you with your business plans.

	When you're looking for money to move on a business deal, it does not really
matter where the money comes from, or how it all comes about.  It's important that you
get the money, and at terms that are suitable to you.  Thus, don't overlook the possibilities
of an advertisement for a lender or investor in your local papers.  Place your ad as well in
national publications reaching people looking for investments.  Other avenues to
seriously consider are foundations that offer grants, local dental and medical investment
groups, legal investment groups, business associations, trust companies and other groups
or organizations looking for tax shelters.

	Basically, it isn't a good idea to go to a finance company or other commercial
lender of this type for a business loan.  The most obvious reason is the high interest rates
you have to pay.  These companies borrow money from larger money lenders, and then
turn around and lend it to you at a higher interest rate than they pay.  Herein lies the
means by which they make money from granting loans to you.  The more it costs them to
provide the money for you, the more it's going to cost you to borrow their money.  The
only element in your favor when borrowing from one of these agencies is that most will
generally lend you money against collateral other lenders just won't accept.  Insurance
companies, pension funds, and commercial paper houses are not too out of sight with
their interest rates, but they generally will not even consider talking to you unless you're
requesting $500,000 or more.  They'll also pretty much require that your business
proposal be backed by the best possible plan.

	Finally, the bottom line is this:  You must have a well-researched and detailed
business plan; you must have all your documents and projections put together in an
impressive presentation; and then, you will have to be the one who does the final selling
of your proposal to the investor or lender.  This means your appearance, personality and
attitude, because - make no mistake about it - before anyone lends you any size able
amount of money, they're going to want to take a close look at you personally before they
hand over the money.

	Actually, the different ways of financing a franchise opportunity are as many and
varied as your own creativity.  The sources of obtaining money are virtually limitless, and
available to anyone with an idea.

	One word of caution before you jump into any franchise purchase agreement:  The
price you pay to participate in a franchise operation is not always the total cost involved
in
getting the business off the ground.  With some franchise operations, you may find other
costs such as down payments on the purchase of property, building construction costs,
remodeling or site improvements, equipment, fixtures, signs, advertising, and training.
Virtually all franchise deals require that in addition to the purchase price or the license fee
of the franchise, you're required to give a certain percentage of your gross business
income to the franchiser, plus extra payments for promotion and administrative costs.
Above all else, before you get involved in a franchise, or any business venture for that
matter, make sure you've conducted a complete and thorough investigation of the
opportunity presented.  If it's a good deal, then go with it; but if you have any doubts or
feel as though you're getting in over your head, back off and look around for something
not quite so ambitious, or perhaps expensive.

	There are a lot of good franchise opportunities, and some not so good.  It's
important that you be sure of what you're investing in, and that you can make money with
it.  From there, preparing the proper business plan and the necessary financing, while not
always a snap, can be done.  Now's the time to do it!  We wish you outstanding success
with your franchise business.